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The homeownership gap

Author

Listed:
  • Andrew F. Haughwout
  • Richard Peach
  • Joseph Tracy

Abstract

After rising for a decade, the U.S. homeownership rate peaked at 69 percent in the third quarter of 2006. Over the next two and a half years, as home prices fell in many parts of the country and the unemployment rate rose sharply, the homeownership rate declined by 1.7 percentage points. An important question is, how much more will this rate decline over the current economic downturn? To address this question, we propose the concept of the "homeownership gap" as a gauge of downward pressure on the homeownership rate. We define the homeownership gap as the difference between the "official" homeownership rate and a recomputed rate that excludes owners who are in a negative equity position, meaning that the value of their houses is less than their outstanding mortgage balance. Our estimate of this gap suggests that the official homeownership rate will likely experience significant downward pressure in the coming years.

Suggested Citation

  • Andrew F. Haughwout & Richard Peach & Joseph Tracy, 2009. "The homeownership gap," Staff Reports 418, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednsr:418
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    References listed on IDEAS

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    1. Engelhardt, Gary V. & Eriksen, Michael D. & Gale, William G. & Mills, Gregory B., 2010. "What are the social benefits of homeownership? Experimental evidence for low-income households," Journal of Urban Economics, Elsevier, vol. 67(3), pages 249-258, May.
    2. Jonathan McCarthy & Richard Peach, 2002. "Monetary policy transmission to residential investment," Economic Policy Review, Federal Reserve Bank of New York, issue May, pages 139-158.
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    Cited by:

    1. Lynn Fisher & Lauren Lambie-Hanson & Paul S. Willen, 2010. "A profile of the mortgage crisis in a low-and-moderate-income community," Public Policy Discussion Paper 10-6, Federal Reserve Bank of Boston.
    2. Lambie-Hanson, Lauren, 2015. "When does delinquency result in neglect? Mortgage distress and property maintenance," Journal of Urban Economics, Elsevier, vol. 90(C), pages 1-16.
    3. Schulhofer-Wohl, Sam, 2012. "Negative equity does not reduce homeowners’ mobility," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Feb, pages 1-17.
    4. Lauren Lambie-Hanson, 2013. "When does delinquency result in neglect?: mortgage delinquency and property maintenance," Public Policy Discussion Paper 13-1, Federal Reserve Bank of Boston.
    5. Konstantin A. Kholodilin & Andreas Mense, 2011. "Can Internet Ads Serve as an Indicator of Homeownership Rates?," Discussion Papers of DIW Berlin 1168, DIW Berlin, German Institute for Economic Research.
    6. Michael Brocker & Christopher Hanes, 2014. "The 1920s American Real Estate Boom and the Downturn of the Great Depression: Evidence from City Cross-Sections," NBER Chapters,in: Housing and Mortgage Markets in Historical Perspective, pages 161-201 National Bureau of Economic Research, Inc.
    7. Rajashri Chakrabarti & Donghoon Lee & Wilbert van der Klaauw & Basit Zafar, 2013. "Household Debt and Saving during the 2007 Recession," NBER Chapters,in: Measuring Wealth and Financial Intermediation and Their Links to the Real Economy, pages 273-322 National Bureau of Economic Research, Inc.
    8. Chan, Sewin & Haughwout, Andrew & Tracy, Joseph, 2015. "How Mortgage Finance Affects the Urban Landscape," Handbook of Regional and Urban Economics, Elsevier.
    9. Andrew F. Haughwout & Sarah Sutherland & Joseph Tracy, 2013. "Negative equity and housing investment," Staff Reports 636, Federal Reserve Bank of New York.

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    Keywords

    Home ownership ; Recessions ; Mortgages;

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