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Changes in Homeowners’ Financial Security during the Recent Housing and Mortgage Boom


  • Kate Sabatini
  • Christian E. Weller


From the late 1990s through 2005, the U.S. experienced an unprecedented housing boom, which boosted the asset values of many families. This meant, on the one hand, that families with homes had more collateral to borrow against, but it also meant that new home buyers needed to take out larger mortgages to afford a home. After 2001, the U.S. saw a sharp acceleration in the growth rate of household debt. Using data from the Survey of Consumer Finances conducted by the Federal Reserve, which we supplement with data from the Flow of Funds Accounts generated by the Federal Reserve, we consider the effect of the housing and mortgage boom on the financial security of homeowners. The data indicate that all measures of vulnerability are increasing and suggest declining financial security for homeowners after 2000. The increases in financial vulnerability were especially pronounced for minorities, younger families, and lower income families.

Suggested Citation

  • Kate Sabatini & Christian E. Weller, 2007. "Changes in Homeowners’ Financial Security during the Recent Housing and Mortgage Boom," Working Papers wp125, Political Economy Research Institute, University of Massachusetts at Amherst.
  • Handle: RePEc:uma:periwp:wp125

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    References listed on IDEAS

    1. John Y. Campbell & João F. Cocco, 2003. "Household Risk Management and Optimal Mortgage Choice," The Quarterly Journal of Economics, Oxford University Press, vol. 118(4), pages 1449-1494.
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    8. Andreas Lehnert, 2004. "Housing, consumption, and credit constraints," Finance and Economics Discussion Series 2004-63, Board of Governors of the Federal Reserve System (U.S.).
    9. DiPasquale, Denise & Glaeser, Edward L., 1999. "Incentives and Social Capital: Are Homeowners Better Citizens?," Journal of Urban Economics, Elsevier, vol. 45(2), pages 354-384, March.
    10. James VanderHoff, 1996. "Adjustable and Fixed Rate Mortgage Termination, Option Values and Local Market Conditions: An Empirical Analysis," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 24(3), pages 379-406.
    11. N. Edward Coulson, 2002. "Housing policy and the social benefits of home ownership," Business Review, Federal Reserve Bank of Philadelphia, issue Q2, pages 7-16.
    12. Posey, Lisa L. & Yavas, Abdullah, 2001. "Adjustable and Fixed Rate Mortgages as a Screening Mechanism for Default Risk," Journal of Urban Economics, Elsevier, vol. 49(1), pages 54-79, January.
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