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Why did young families lose so much wealth during the crisis? the role of homeownership

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  • William R. Emmons
  • Bryan J. Noeth

Abstract

The authors use the Federal Reserve?s Survey of Consumer Finances to document a boom in home ownership and mortgage borrowing among young families in the years leading up to the recent financial crisis. Many young families lost more of their wealth during the downturn than middle-aged and older families. The authors find that about three-quarters of the decline in the average young family?s wealth between 2007 and 2010 was due to its exposure to residential real estate. For middle-aged and older families, housing losses contributed about 53 percent and 40 percent of the total decline in wealth, respectively. Regression evidence suggests that young families? wealth, on average, was unusually highly concentrated in housing and these families? debt burdens were extremely high at the peak of the boom.

Suggested Citation

  • William R. Emmons & Bryan J. Noeth, 2013. "Why did young families lose so much wealth during the crisis? the role of homeownership," Review, Federal Reserve Bank of St. Louis, issue Jan, pages 1-26.
    • Handle: RePEc:fip:fedlrv:y:2013:i:january:p:1-26:n:v.95no.1
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    1. William R. Emmons & Bryan J. Noeth, 2012. "Household financial stability: who suffered the most from the crisis?," The Regional Economist, Federal Reserve Bank of St. Louis, issue Jul.
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    Cited by:

    1. Wegener, Christoph & Kruse, Robinson & Basse, Tobias, 2019. "The walking debt crisis," Journal of Economic Behavior & Organization, Elsevier, vol. 157(C), pages 382-402.
    2. Dag Einar Sommervoll & Jan de Haan, 2014. "Homes and Castles: Should We Care about Idiosyncratic Risk?," Land Economics, University of Wisconsin Press, vol. 90(4), pages 700-716.
    3. J. Michael Collins & John Karl Scholz & Ananth Seshadri, 2013. "The Assets and Liabilities of Cohorts: The Antecedents of Retirement Security," Working Papers wp296, University of Michigan, Michigan Retirement Research Center.
    4. Terri Friedline & Ilsung Nam, 2014. "Savings From Ages 16 to 35: A Test to Inform Child Development Account Policy," Poverty & Public Policy, John Wiley & Sons, vol. 6(1), pages 46-70, March.
    5. Ellen A. Merry & Logan Thomas, 2014. "Asset Holdings of Young Households: Trends and Patterns," Review, Federal Reserve Bank of St. Louis, vol. 96(4), pages 391-411.
    6. William R. Emmons & Bryan J. Noeth, 2013. "Economic vulnerability and financial fragility," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 361-388.
    7. Dunn, Lucia & Olsen, Randall, 2014. "US household real net worth through the Great Recession and beyond: Have we recovered?," Economics Letters, Elsevier, vol. 122(2), pages 272-275.

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    Keywords

    Home ownership - United States; Wealth;

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