Monday, December 19, 2016
Housing: Part 195 - More on homeownership, income, and wealth
First, the mortgage debt and home values as a proportion of total assets. For the lower income quintiles, debt is less important and home values are more important. As incomes rise, homes comprise a smaller portion of total assets and households hold more mortgage debt.
This is just another way of repeating that the rise in mortgage debt was not a low income phenomenon. On the other hand, changing home values have more of an effect on low income balance sheets, on average, than they do on high income balance sheets.
But, there is a caveat. The second graph compares the relative changes in the value of homes, arranged by household income. This shows how the housing price boom was concentrated at higher incomes. When you look at home prices within each MSA, there are many MSAs with relatively little difference between low income and high income zip codes. But, in the Closed Access cities, home prices in low income zip codes increased significantly more than in high income zip codes.
Yet, here we see the opposite pattern. This country has segregated by income, so measures of the top income quintile are largely measures of Closed Access cities. The 2nd income quintile is mainly a measure of non-urban incomes and home values. The bottom quintile includes a lot of retirees and idiosyncratic households. As I look at this a second time, I'm surprised by the sharp relationship. Home values in the 2nd income quintile rose by less than 50%. Homes for top decile families rose by nearly 150%.
high incomes and young households. Here we can see that among high net worth households, homeownership has always been nearly universal. Credit access during the boom was mostly a way to increase ownership of households with high incomes but not as high net worth.
We can also see here how our fears of credit and our over-reaction, have led to mortgage markets that are very unfriendly to households without the means to make a large down payment. The boom helped high income, middling net worth households. The bust has hurt low income, middling net worth households. And many households have been pushed to the bottom net worth quartile because they owned homes.