Housing debt is one reason people end up short of cash. Focusing in on American homeowners, the researchers find that of those with small mortgages, only 20% live hand to mouth. But once total debt approaches the value of the house, a much higher number—close to 50%—are income-constrained. Age is also a factor. Although the likelihood of genuine poverty tends to fall with age as workers build up buffers, the chances of being wealthy but cash-strapped peak around the age of 40.
http://www.economist.com/news/finance-and-economics/21648044-policies-shift-income-rich-poor-may-prove-less-effective
http://www.economist.com/news/finance-and-economics/21648044-policies-shift-income-rich-poor-may-prove-less-effective
7 comments:
The age group that is most affected by housing debt is the same generation that was motivated to pursue the American dream very fast after college and get a house. However, most recent grads are taking a longer time to obtain their own homes and are spending time living in smaller apartments or moving back in with their parents until they've saved enough to be independent. After the great recession, people are more careful about getting tied to a mortgage.
Ibs raises a valid point. It will be fascinating to see if the "American Dream" of owning a house continues in the future with millennials. If people become increasingly interested in renting, how will income distribution be impacted by fewer individuals owning land? I believe that people will still purchase homes, just later in life. I see this being correlated with later marriage rates, as well.
I agree with Ibrahim. Ever since the housing market crash, individuals are more careful about getting a home mortgage. Especially, recent college graduates, which is why they are living back at home. If these individuals save as much as they can, they will be more prepared to take on a mortgage later on. Hopefully, this trend will decrease the cash-strapped peak age.
Personally, my reasons for not getting a mortgage are because I don't want to be tied down to one area. If I move, I would either have to sell the house or find a tenant to help pay the mortgage so I wouldn't have to pay double. I think a more fluid housing market would definitely help, so houses would be easier to sell and make the investment less risky.
Especially with the job market continuing to be tied down with Boomers remaining in their positions due to the financial downturn, it's possible that a lack of advancement opportunities created by this will contribute to later in life housing purchases further.
I would have to agree with what has been said already. I think that since the recession people have become more reluctant to get involved in a 30 year mortgage. Especially the younger generations who still question job security. They want to be mobile and ready for a potential career shift.
I feel like American don't really concern much about debt because there's a payment and loan for everything. the social benefits are too high so people are not really worry much about savings and paying up debt. People need to learn to manage their money better
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