Homeownership

[Doug Henwood]

Yoshie asked how many U.S. households own their cribs outright, as opposed
to still paying the mortgage. Unfortunately the Census reports don't have
that info, but one interesting clue - the Fed estimates that home mortgages
totaled 43.3% of the value of residential real estate in 1997, an all-time
high (though it's been fairly flat over the last 4 years) - up from 37.7%
in 1990, and around 30% in the early 1980s (and 13.7% in 1945). This
reflects not only bigger loans and smaller downpayments, but the use of
home equity loans to support consumer spending (and probably stock
speculation, I mean investment, too). We won't know for sure how
over-extended people are on mortgages until the next recession - and how
many of them used home equity loans (and VISA advances) to play on Wall
Street until the next bear market, if there ever is one. But the Clinton
administration has pushed a 5% down payment policy to expand homeownership.
And I saw a TV ad the other day for some company that specializes in
no-down-payment mortgages. Leverage is such a beautiful thing on the upside.

Doug