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

Last updated: June 7, 2012

 

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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.