Statistical Note #1: Negative Equity and Mortgage Affordability Problems: 1985 Versus 2005

Abstract

This paper utilizes data from the Panel Study of Income Dynamics (PSID) to assess changes in housing equity and mortgage affordability across age groups between 1985 and 2005. The tabulations presented here indicate the share of the population with negative equity and the share of the population with potentially unaffordable mortgages both increased over this time frame. Changes in equity were more severe for younger households while changes in payment issues were more severe for older age groups. The tabulations from the PSID indicate approximately one-third of households (household head 55-years old or over) with a mortgage have a remaining mortgage balance greater than three times income.

Keywords: mortgages, house equity, affordability, retirement income

JEL Classification: R21, R31, R33, J26