Confidence in Home Ownership after the Housing Crisis

A new paper from the Federal Reserve Bank of Boston looks at whether the “Great Recession” has changed how people feel about homeownership.  The study found that people who in 2008 lived in zip codes that were hardest hit by the crash in housing prices, as compared to those in areas least severely affected, are (1) significantly more likely to be confident about owning a home if they are older (above age 58) but (2) significantly less likely to be confident if they are younger. 

The study’s results also imply that merely having information about an adverse event is not enough to change behavior but a direct experience (an individual or someone he or she knows going through a foreclosure or losing a significant amount of money in the housing crisis) does change an individual’s confidence in homeownership.  The authors suggest the difference in confidence levels based on age may reflect the malleability of younger people’s attitudes and how they internalized the drop in housing prices as a regime change where housing is a risky investment.  The authors state that other studies suggest that such a perceptual change is likely to be persistent.  The authors also suggest that older people may see the drop as temporary.