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The Six Trillion Dollar Loss of Housing Wealth in the Great Recession: What are the Long-Term Consequences?

Awarded Scholars

Ingrid Gould Ellen, New York University
Project Date: June, 2011
Award Amount:$145,613

Existing homes in the U.S. have lost about a third of their market value since the peak of the housing bubble in early 2006, and housing prices are still setting new lows. Researchers at the Federal Reserve Bank of New York estimate that homeowners’ equity has fallen by over 50 percent, or about six trillion dollars, during this period. Some 22 percent of all mortgages are now estimated to be for homes that are worth less than is owed. And, economists predict that between eight and 13 million homes will have been foreclosed before the crisis ends.

It is not precisely known how these losses in housing wealth have been distributed across individual households and how these households have responded to the losses. Ingrid Gould Ellen, along with Vicki Been and Sewin Chen at the Furman Center for Real Estate and Urban Policy at NYU, will construct estimates of home equity losses for individual households using data from three large national surveys. Their sources will include the American Housing Survey, the Health and Retirement Survey and the Federal Reserve Bank of New York’s Consumer Credit Panel (CCP). The data will allow them to study the effects these losses have had on important aspects of household behavior, including savings and debt repayment, education, retirement, financial transfers to family members, and changes in household composition due to increased doubling up. Findings will be reported in journal articles and several research briefs.