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Key Findings Details

Diminishing Margins: Housing Market Declines and Family Financial Responses
by Frank Stafford, Erik Hurst and Bing Chen
WP 2012-276
  • Using the Panel Study of Income Dynamics, we study the factors related to family level mortgage distress and foreclosure in the U.S. economy, 2007-2011.
  • The most substantial predictor of mortgage distress and foreclosure is the family’s allocation of a high share of family income to supplement cash flow and spending. 
  • Higher values of housing payments to family income -- HPI -- were more common in markets with strong appreciation during the housing boom.
  • Substantial mortgage borrowing relative to current family income is an indication that the family expects a price rise to reward their current payment burden or that they simply have housing that is likely beyond their means.