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Mortgage distress: How U.S. families are handling savings, mortgages and other debts

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The U.S. mortgage crisis that triggered the Great Recession was caused in part by subprime lending, and researchers have continued to study the dynamics of how such mortgages affect real estate markets and home ownership rates. Other research has examined how families respond to losing their homes.

A May 2012 report from researchers at the University of Michigan’s Institute for Social Research, “Mortgage Distress and Financial Liquidity: How U.S. Families are Handling Savings, Mortgages and Other Debts,” analyzed data from the Panel Study of Income Dynamics (PSID), which surveyed roughly 9,000 representative households in 2009 and 2011.

The report’s findings include:

  • In 2009, 37.9% of families were living in rented properties; in 2011, that figure was 36.9%. Overall, this implies that the rate of home ownership stayed roughly constant at 63%.
  • In 2009, among families who were not renting, “19.7% were homeowners and did not have a mortgage. This rate increased in 2011 to 22.3%.”
  • In 2009, 2.2% of families were behind on mortgage payments; this figure had fallen to 1.9% by 2011. Among all families, a “total of 3.5% of families were homeowners and behind on their mortgage payments in either or both 2009 and 2011.” This means that “approximately 4.1 million were homeowners and behind on their mortgage in 2009 and/or 2011.”
  • Conditions seem to be improving: “In 2009, 6% of families stated that they thought it was very likely or somewhat likely that they would fall behind. This rate moved downward by 2011 to 4.6%.”
  • Of those families who stated they were behind on their mortgages in 2009, two years later 19% had become renters, “45.1% stated that they were no longer behind on their mortgage,” and “9.3% [stated] that they were homeowners but no longer had a mortgage.”
  • Credit card and other non-collateralized debt stayed nearly constant between 2009 and 2011 among participating families, but financial liquidity decreased: “As of 2009, 18.5% of families had no liquid assets, and by 2011 this had grown to 23.4% of families.”

The authors conclude: “Families are making their way through the economic conditions of 2008-2012 and there appear to be some financial improvements, after a decline in the overall rate of home ownership established in recent Census Data…. Many have responded to the economic conditions by modifying their mortgages or simply becoming owners with no mortgage, or voluntarily or otherwise moving from owning to renting. We can see that families with mortgage difficulties in 2009 were more likely to end up as renters in 2011. Looking forward to 2013, we see that there is some modest reduction in the percent of families expecting to experience payment problems.”

Tags: economy, financial crisis, consumer affairs

    Writer: | Last updated: June 7, 2012

    Citation: Stafford, Frank; Chen, Bing; Schoeni, Robert. “Mortgage Distress and Financial Liquidity: How U.S. Families are Handling Savings, Mortgages and Other Debts,” University of Michigan Institute for Social Research, May 2012.

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    Media analysis

    Read the issue-related New York Times article titled "A Dream of Home Ownership, Still Beyond Reach."

    1. What key insights from the article and the report should reporters be aware of as they cover housing-related issues?

    Study analysis

    Read the study titled “Mortgage Distress and Financial Liquidity: How U.S. Families are Handling Savings, Mortgages and Other Debts” (PDF).

    1. What are the study's key technical term(s)? Which ones need to be put into language a lay audience can understand?
    2. Do the study’s authors put the research into context and show how they are advancing the state of knowledge about the subject? If so, what did the previous research indicate?
    3. What is the study’s research method? If there are statistical results, how did the scholars arrive at them?
    4. Evaluate the study's limitations. (For example, are there weaknesses in the study's data or research design?)
    5. How could the findings be misreported or misinterpreted by a reporter? In other words, what are the difficulties in conveying the data accurately? Give an example of a faulty headline or story lead.

    Newswriting and digital reporting assignments

    1. Write a lead, headline or nut graph based on the study.
    2. Spend 60 minutes exploring the issue by accessing sources of information other than the study. Write a lead (or headline or nut graph) based on the study but informed by the new information. Does the new information significantly change what one would write based on the study alone?
    3. Compose two Twitter messages of 140 characters or fewer accurately conveying the study’s findings to a general audience. Make sure to use appropriate hashtags.
    4. Choose several key quotations from the study and show how they would be set up and used in a brief blog post.
    5. Map out the structure for a 60-second video segment about the study. What combination of study findings and visual aids could be used?
    6. Find pictures and graphics that might run with a story about the study. If appropriate, also find two related videos to embed in an online posting. Be sure to evaluate the credibility and appropriateness of any materials you would aggregate and repurpose.

    Class discussion questions

    1. What is the study’s most important finding?
    2. Would members of the public intuitively understand the study’s findings? If not, what would be the most effective way to relate them?
    3. What kinds of knowledgeable sources you would interview to report the study in context?
    4. How could the study be “localized” and shown to have community implications?
    5. How might the study be explained through the stories of representative individuals? What kinds of people might a reporter feature to make such a story about the study come alive?
    6. What sorts of stories might be generated out of secondary information or ideas discussed in the study?