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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.

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Paper provided by Political Economy Research Institute, University of Massachusetts at Amherst in its series Working Papers with number wp125.

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Date of creation: 2007
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Handle: RePEc:uma:periwp:wp125
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  1. 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.
  2. 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.
  3. Richard K. Green & Michelle J. White, 1994. "Measuring the Benefits of Homeowning: Effects on Children," University of Chicago - George G. Stigler Center for Study of Economy and State 93, Chicago - Center for Study of Economy and State.
  4. Dean Baker, 2002. "The Run-up in Home Prices: A Bubble," Challenge, M.E. Sharpe, Inc., vol. 45(6), pages 93-119, November.
  5. Donald R. Haurin & Toby L. Parcel & R. Jean Haurin, 2002. "Does Homeownership Affect Child Outcomes?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(4), pages 635-666.
  6. Campbell, John & Cocco, Joao, 2003. "Household Risk Management and Optimal Mortgage Choice," Scholarly Articles 3157876, Harvard University Department of Economics.
  7. John Harding & Thomas J. Miceli & C.F. Sirmans, 2000. "Do Owners Take Better Care of Their Housing Than Renters?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(4), pages 663-681.
  8. 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.
  9. Krumm, Ronald & Kelly, Austin, 1989. "Effects of homeownership on household savings," Journal of Urban Economics, Elsevier, vol. 26(3), pages 281-294, November.
  10. Baker Dean, 2006. "The Menace of an Unchecked Housing Bubble," The Economists' Voice, De Gruyter, vol. 3(4), pages 1-5, March.
  11. 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.).
  12. 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.
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