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Strategies & Market Trends : The Residential Real Estate Crash Index
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To: Tradelite who wrote (25517)11/30/2004 10:36:46 PM
From: Elroy JetsonRead Replies (1) of 306849
 
The information that roughly 40% of American homeowners own their homes free of debt comes from the "Statistical Abstract of the United States."

This is a very useful book published each year by the Federal Government with information from the Census, Federal Reserve, and other governmental agencies. It's available in virtually every library.

The 40% without a mortgage consists primarily of:

a.) people wealthy enough to have never needed a mortgage;
b.) older people who have paid off their mortgage.

This percentage is declining as an increasing number of older people enter retirement with debts and take on additional debts as their retirement progresses. Reverse mortgages make up a very small portion of this debt, but it is increasing.

Previous generations who retired with a private pension or investment properties, in addition to social security, are being replaced by people with far less secure and more volatile income. This comes from lump-sum 401k and IRAs invested in volatile stock and bond markets and investment properties which are more heavily leveraged than in the past.

Prior to 1945 the percentage of those who owned their own homes ranged from a low of 26% during the depression to a high of 46% during the preceding euphoria of the economic 1920s. And virtually all of these home owners actually owned their own homes, rather than living in a bank-owned home with the illusion of ownership. The longest mortgages were only five years, and most were actually renewable one year loans which could be called at the banks option each year.

Yt appears that the numbers from fifteen years ago which showed 44% owned their own homes free of debt was a high-water mark which will not bee seen again anytime soon. As we continue on the road to an ever more leveraged society this number will decline -- at least until the next economic depression undoes the damage caused by our Monetarist economic system.
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