You want fast growth in today's economy? Fine, but with the pressure of speed comes increased danger of missteps. Kirk Dando covers a dozen mistakes that "derail growth hungry companies" in a new book, Predictive Leadership. He shares some of his key findings with Sara Murray of the Wall Street Journal's NewsHub.
Personal income rose again in April, though not at the rate of previous months this year, while consumer spending dropped for the first time in 2014, according to the Commerce Department. Real disposable personal income continued its steady climb rising 0.3%. Real consumer spending dropped 0.3%. The savings rate and prices also rose in April.
From the Bureau of Economic Analysis release:
Private wages and salaries increased $16.9 billion in April, compared with an increase of $44.6 billion in March.
Goods producing industries' payrolls decreased $0.1 billion, in contrast to an increase of $10.2 billion; manufacturing
payrolls decreased $1.2 billion, in contrast to an increase of $7.8 billion. Services-producing industries' payrolls
increased $16.9 billion, compared with an increase of $34.5 billion. Government wages and salaries increased
$1.4 billion, compared with an increase of $0.9 billion.
Read the BEA's full report here.
Paddy Hirsch says that investing in exchange-traded funds is relatively easy. But their "simplicity" is what makes them so dangerous. He explains ETFs at the Marketplace Whiteboard:
It has taken some time to restart borrowing, and lending, after the Great Recession, but consumers are taking on more debt. For three straight quarters, total consumer debt has risen, note at Liberty Street Economics. But is this the result of banks now being less risk averse? According to some recent work by the New York Fed's Basit Zafar, Max Livingston, and Wilbert van der Klaaw, that does not seem to be the case. From Liberty Street Economics:
To assess the demand for credit and measure how much of that demand was met, we classify our respondents into four groups. In February 2014, 40 percent of respondents reported not applying for any type of credit over the past twelve months because they didn’t need it (satisfied consumers); 40 percent of respondents reported applying for some type of credit and being approved (accepted applicants); 13 percent reported applying for some type of credit and being rejected (rejected applicants); and 8 percent reported not applying for credit despite needing it because they believed they would not be approved. This last group represents latent demand for credit; we refer to them as discouraged consumers. The leftmost two bars in the chart below show that the distribution of respondents in February 2014 looked quite similar to that in May 2013 (the results of which we discussed in a previous post): we see a slight increase in satisfied consumers from May to February and a slight decrease in accepted applicants. Note that the SCE is a rotating panel, so the respondents in the two surveys will be different; however, we use weights to ensure that the statistics reported in this post remain representative of the population of U.S. household heads.
The picture, however, varies radically when split by credit score. The chart above shows that individuals with lower credit scores (those with credit scores below 680) were more likely to report that they were rejected, and much more likely to report that they were discouraged, than their more creditworthy counterparts. In February, 22 percent of respondents in the low-credit-score group were discouraged, versus 3 percent in the middle-credit-score group, and zero percent in the high-credit-score group (those with scores of above 760). Furthermore, the chart shows that credit experiences got markedly worse for the low-credit-score group in February 2014 compared with May 2013: 57 percent of this group reported either being denied credit or being too discouraged to apply in February this year, versus 47 percent in May of last year. This result contrasts with the experiences of their more creditworthy counterparts, which were largely unchanged since May 2013. These patterns suggest that although banks may be increasing their lending activity, they are not necessarily taking on more risk, as the risky population has not seen an improvement in its ability to obtain credit.
Read Rising Household Debt: Increasing Demand or Increasing Supply? here.
When things don't quite work out, we can always blame the operating system. OUR operating system. The brain is wonderful beyond words. And yet, the more we learn about how it works, the more we realize there are some bugs.
At the 2014 Games for Change Festival, Dan Ariely shared some fascinating findings from his research on decision-making. And while it is discouraging to hear that humans are wired to make a lot of really bad decisions--even when their fiscal and physical well being is in danger--knowing about the weakness can help us figure out tools or games to protect ourselves from ourselves.
The good news: while obesity rates keep climbing in developed nations, the rate at which they are climbing has slowed down. This according to the latest OECD report on obesity among member nations.
Rising obesity rates means rising costs to the economy. But there may also be a strong link from economic struggles to the rise in obesity. From the report:
In 2008, the world economy entered one of the most severe crises ever. Many families, especially in the hardest hit countries,
have been forced to cut their food expenditures, and tighter food budgets have provided incentives for consumers to switch to
lower-priced and less healthy foods.
During the 2008-09 economic slowdown, households in the United Kingdom decreased their food expenditure by 8.5% in real terms,
with some evidence of an increase in calorie intake (the average calorie density of purchased foods increased by 4.8%). This change
resulted in additional 0.08 g of saturated fat, 0.27 g of sugar and 0.11 g of protein per 100 g of purchased food (Institute for Fiscal
Studies, Briefing Note No. 143). A similar trend was observed in Asian countries experiencing a recession in the late 1990s, with
consumers switching to foods with a lower price per calorie (Block et al., 2005, Economics and Human Biology; World Bank, 2013,
Working Paper No. 6538).
Between 2008 and 2013, households in Greece, Ireland, Italy, Portugal, Spain and Slovenia decreased slightly their expenditure
on fruits and vegetables, while households in other European OECD countries increased it at an average of 0.55% per year
(OECD/ Imperial College analyses of passport data, Euromonitor International). Fruit and vegetable consumption was inversely
related with unemployment in the United States, in the period 2007-09, and the effect was three times stronger in
disadvantaged social groups at higher risk of unemployment (corresponding to a 5.6% decrease in fruit and vegetable
consumption for each 1% increase in state-level unemployment). Given the size of job losses at the peak of the crisis, the most
vulnerable groups may have reduced their consumption by as much as 20% (Dave and Kelly, 2012, Social Science and Medicine).
Evidence from Germany, Finland and the United Kingdom shows a link between financial distress and obesity. Regardless of their
income or wealth, people who experience periods of financial hardship are at increased risk of obesity, and the increase is
greater for more severe and recurrent hardship (Munster et al., 2009, BMC Public Health; Conklin et al., 2013, BMC Public Health;
Laaksonen et al., 2004, Obesity Research). An Australian study found that people who experienced financial distress in 2008-09
had a 20% higher risk of becoming obese than those who did not (Siahpush et al., 2014, Obesity). Financial hardship affects all
household members. American children in families experiencing food insecurity are 22% more likely to become obese than
children growing in other families (Metallinos-Katsaras et al., 2012, Journal of the Academy of Nutrition and Dietetics).
While some evidence suggests that shorter working hours and lack of employment are associated with more recreational
physical activity (Tekin et al., 2013, NBER Working Paper No. 19234), at times of increasing unemployment any gains are likely to
be offset by reduced work-related physical activity. In the United States, in the aftermath of the economic crisis, leisure-time
physical activity increased by three METs (metabolic equivalents – a measure capturing both duration and intensity of physical
activity) but work-related physical activity decreased by 19 METs (Colman and Dave, 2013, NBER Working Paper No. 17406).
In summary, the evidence of a possible impact of the economic crisis on obesity points rather consistently to a likely increase in
body weight and obesity.
Download the full report here.
"Leadership is a choice. It is not a rank."
So says Simon Sinek in this recent Ted Talk. Sinek studies leadership. In this talk he shares some of what he learned in researching and writing Start With Why: How Great Leaders Inspire Everyone to Take Action.
Home prices continued to rise in March, but as has been the case all year, the rate of growth was rather modest. According to the latest Case-Shiller Home Price Indices release, prices rose 0.8% in the 10-city composite, and 0.9% in the 20-city composite. For the first quarter, the national index rose only 0.2%.
Year-over-year the 10-city
composite index came in at 12.6% while the 20-city composite was at
From the release:
“The year-over-year changes suggest that prices are rising more slowly,” says David M. Blitzer,
Chairman of the Index Committee at S&P Dow Jones Indices. “Annual price increases for the two
Composites have slowed in the last four months and 13 cities saw annual price changes moderate in
March. The National Index also showed decelerating gains in the last quarter. Among those markets
seeing substantial slowdowns in price gains were some of the leading boom-bust markets including
Las Vegas, Los Angeles, Phoenix, San Francisco and Tampa.
“Despite signs of decelerating prices, all cities were higher than a year ago and all but New York were
higher in March than in February. However, only Denver and Dallas have set new post-crisis highs
and they experienced relatively lower peak levels than other cities. Four locations are fairly close to
their previous highs: Boston (8%), Charlotte (9%), Portland (13%) and San Francisco (15%).
“Housing indicators remain mixed. April housing starts recovered the drop in March but virtually all
the gain was in apartment construction, not single family homes. New home sales also rebounded
from recent weakness but remain soft. Mortgage rates are near a seven month low but recent
comments from the Fed point to bank lending standards as a problem. Other comments include
arguments that student loan debt is preventing many potential first time buyers from entering the
Read the full release here.
Memorial Day is big business for gas stations. But it turns out that in many areas of the country, people will have fewer places to stop for gas than in the past. As Daniel Tucker reports for Marketplace, big gas stations with double digit numbers of pumps are guzzling market share. Take a listen (and note how few gas stations are left in Manhattan):
The Brookings Institution hosted a discussion with John Carlin, Assistant Attorney General for National Security. The topic was not terrorism, but another threat to national security: economic espionage. Carlin addressed the massive cost of economic espionage, and the efforts underway at the Justice Department to track and prevent intellectual property theft. Here is an excerpt:
Watch the full talk here.
As policy makers in advanced economies still struggle with immigration reform, the debate over the net economic impact continues. A recent policy brief by researchers at the OECD tries to bring some clarity to the issue. One key finding: migrants essentially have a "neutral fiscal impact," as the cost of the benefits they receive is balanced out by what they put back in in the form of taxes and other contributions. And the employment rate of migrants matters. A lot. From the brief:
Labour migration brings greatest benefits. The rate of
employment among migrants is the key factor in determining
migration’s impact on the public purse. The biggest positive
impact is found where an immigrant population includes
large numbers of people who have arrived relatively recently
to work. By contrast, the least positive impact is seen in
countries where there is a longstanding migrant population
and relatively little recent labour migration. But even where
the impact is less favourable, the reasons have usually less to
do with a greater dependence on social benefits and more to
do with the fact that immigrants may be earning lower wages
and thus paying lower taxes. Raising migrants’ employment
rates to match those of locals is, where appropriate, an
important consideration for public policy both for economic
reasons and – in many cases – to help migrants meet their
Positive showing for low-educated migrants. The fiscal
situation of low-educated migrants – in other words, the
difference between the contributions they make and the
benefits they receive – is stronger than that of their
native-born peers, a finding that may run contrary to
A boost to the labour force. Over the past 10 years, immigrants
represented 47% of the increase in the workforce in the
United States, and 70% in Europe. They play a major role in
sectors of the economy witnessing great change. In Europe,
new immigrants represented 15% of new hires in strongly
growing occupations, such as in healthcare and in science
and technology, and 22% in the United States. But migrants
were also strongly present in declining occupations, taking up
jobs that local workers may regard as unattractive. In Europe,
migrants represented 24% of new hires in areas like machine
operating and assembly; in the US, they represented about 28%
of hires in production, installation and maintenance.
Read the report here.
Knowledge is power. We get that. But that old statement may never have been more true than now. As Fareed Zakaria explains in this Big Think video, knowledge is now the lifeblood for any worker in the global economy. It is not an option, but essential.
For the first time this year, existing-home sales have increased. Sales rose 1.3% in April, according
to the National Association of Realtors. Monthly sales were still 6.8% lower than April 2013. From the release:
Lawrence Yun, NAR chief economist, expected the improvement. “Some growth was inevitable after sub-par housing activity in the first quarter, but improved inventory is expanding choices and sales should generally trend upward from this point,” he said. “Annual home sales, however, due to a sluggish first quarter, will likely be lower than last year.”
Total housing inventory2 at the end of April jumped 16.8 percent to 2.29 million existing homes available for sale, which represents a 5.9-month supply at the current sales pace, up from 5.1 months in March. Unsold inventory is 6.5 percent higher than a year ago, when there was a 5.2-month supply.
“We’ll continue to see a balancing act between housing inventory and price growth, which remains stronger than normal simply because there have not been enough sellers in many areas. More inventory and increased new-home construction will help to foster healthy market conditions,” Yun added.
The median existing-home price3 for all housing types in April was $201,700, which is 5.2 percent above April 2013; in the first quarter the median price was 8.6 percent above a year earlier. “Current price data suggests a trend of slower growth, which bodes well for preserving favorable affordability conditions in much of the country,” Yun said.
Sales may be flat, but that means prices continue to rise. Read the full release here.
Apparently, the "junk" in junk bonds still is not deterring investors. The memo to focus on long run growth rather than chasing the quick money did not reach everyone--or some people lost the memo over the last year. With high returns difficult to find elsewhere, investors are tempted by the potential yields available in the junk bond market. Their confidence may also be buoyed by feeling like their investments elsewhere are safer than in the past, so they can take a little risk, says the Wall Street Journal's Colin Barr. From MoneyBeat:
This week IMF managing director Christine Lagarde spoke at the National Democratic Institute in Washington, DC about the need to empower women. She framed the talk around "the three L's." Learning. Labor. And Leadership:
This brings me to my third ‘L” today. I have talked about learning and labor—the final link in the chain is leadership, letting women rise to the top on their strength of their innate abilities and talents.
We all know the problem—across all fields of work, the higher you climb, the fewer women you see.
The evidence is painfully obvious. Look at the world of business—only 4 percent of CEOs in the Standard and Poor’s 500 company list are women. Plus, as this Institute has documented, only a fifth of parliamentary seats across the world are held by women. Less than 10 percent of countries have female leaders.
Here is the irony, though: when women get the chance to lead, they actually lead better. We have ample evidence of this. For example, one study shows that the Fortune 500 firms with the best track record in raising women to prominent positions are 18-69 percent more profitable than median firms in their area.
Women are also far less likely to engage in the kind of reckless risk-taking behavior that sparked the global financial crisis. For example, an experiment from the investment community in the 1990s shows that men trade 45 percent more than women, and are more likely to lose big.
Is it really any coincidence that, while the men were cheerleading, it was the women who were worrying most about financial sector excess and misbehavior before the crisis? I am thinking of women like Sheila Bair, Brooksley Born, Janet Yellen, and Elizabeth Warren. Too often, they were ignored and dismissed—but they were proven right.
We also know that women are good managers and good crisis leaders. For example, a study of over 7000 leaders showed that women fared better in 12 of 16 competencies in 12 of 15 sectors. Another recent study shows that women are often parachuted in to save companies in deep trouble—although they are also more likely to be fired from these positions, allegedly because of the risk taken in hiring them.
Read the full speech here.
Unilever chief executive Paul Polman has a new commentary for the McKinsey Quarterly. It's not quite a manifesto, but it is a strong, direct call-to-action. Polman argues that the future of capitalism depends on businesses rethinking their approach to growth. Sustainability can not be an after-thought. It must be part of strategy from the first step. Here is an excerpt in which Polman shares some of what he and his leadership team at Unilever have learned about thinking long term:
Thinking in the long term has removed enormous shackles from our organization. I really believe that’s part of the strong success we’ve seen over the past five years. Better decisions are being made. We don’t have discussions about whether to postpone the launch of a brand by a month or two or not to invest capital, even if investing is the right thing to do, because of quarterly commitments. We have moved to a more mature dialogue with our investor base about what strategic actions serve Unilever’s best interests in the long term versus explaining short-term movements.
That’s very motivational for our employees. We may not pay the same salaries as the financial sector, but our employee engagement and motivation have gone up enormously over the past four or five years. People are proud to work on something where they actually make a difference in life, and that is obviously the hallmark of a purpose-driven business model. We’re getting more energy out of the organization, and that willingness to go the extra mile often makes the difference between a good company and a great one.
Let me be clear, though: a longer-term growth model doesn’t mean underperforming in the short term. It absolutely doesn’t need to involve compromises. If I say we have a ten-year plan, that doesn’t mean “trust us and come back in ten years.” It means delivering proof every year that we’re making progress. We still have time-bound targets and hold people strictly accountable for them, but they are longer than quarterly targets. Often they require investments for one or two years before you see any return. For instance, one of our targets is creating new jobs for 500,000 additional small farmers. We had 1.5 million small farmers who directly depended on us, and we’ve already added about 200,000 more to that group. It’s a long-term goal, but we still hold people accountable. The same is true for moving to sustainable sourcing or reaching millions with our efforts to improve their health and well-being. All of this is hardwired to our brands and all our growth drivers.
You can read the full commentary here. And watch Polman discuss his argument below:
The economy may not be recovering at enough of a pace to please everybody, but it has been steadily getting better in most areas. But over the last nine months or so, the housing market has been bucking the trend--in a bad way. We'll get updated existing home sales data tomorrow, and perhaps we'll see a turn. But that seems unlikely. In a new Economic Letter, San Francisco Fed senior economist John Krainer shares some key data about home sales, and observes that investors, "may be pulling back as house values have increased in comparison with rental prices."
Many indicators of housing market activity stalled over the second half of 2013, but the weakness is most evident in existing home sales. Sales of existing single-family homes reached a recent peak of 4.75 million units in July 2013, compared with the year before and adjusted for seasonal trends. Sales have fallen ever since. Figure 1 shows that the pattern of declining home sales has been broadly similar across different regions of the country. Sales in these regions all reached their peaks in July 2013 and then fell about 10% through October; the figure shows the regions indexed to 100 in July for comparison.
The fact that home sales in different parts of the country peaked and fell together suggests that some common underlying factors were at play. One such factor that could account for the decline in home sales is rising mortgage interest rates. Starting in May 2013, financial market participants became increasingly convinced that the Federal Reserve would soon taper its long-term asset purchases, and interest rates moved up. Mortgage rates in particular rose by nearly a full percentage point. Higher mortgage rates generally have a direct dampening effect on home sales, as buyers face constraints on the size of loans they can secure and on loan payments relative to their incomes. Since individual incomes likely did not rise over this short period, and house prices continued to grow in most regions, the rise in mortgage rates was expected to have an unambiguous negative impact on sales.
To gauge the effects of higher mortgage rates on home sales over time, I use a simple statistical model that relates existing home sales to past sales, past mortgage rates, and house price appreciation. I include past values of single-family construction permits to control for conditions in the market for new homes—a substitute for existing homes.
Figure 2 shows both actual data and dynamic simulations of existing home sales during the period of interest. The model simulations use seasonally adjusted monthly data through March 2013. Beyond that date, I use actual mortgage rates, house price appreciation, and building permits to predict sales of existing homes. This simulation is dynamic in the sense that the model predictions are based on past values of home sales, which themselves are predictions from early periods in the simulation. In the figure, the solid blue line shows the actual path of existing single-family home sales, and the dashed red line is the simulated path from the model. The dashed green line offers another simulation of what sales would have been if mortgage rates had remained at the low levels observed in April 2013.
Read The Slowdown in Existing Home Sales here.
We have come to understand that failure is an important part of success. Or, to be more precise, not being afraid to fail, and learning from failure, is an important part of innovative thinking. But the live chart below, from The Economist, presents a stark picture of failure in the U.S. economy. Since the global economic crises, the number of failed companies each year has exceeded the number of startups.
Robert Shiller welcomes the attention Thomas Piketty's Capital in the Twenty-First Century is bringing to rising economic inequality. But now it is time to start talking about some possible measures. He shares one possible approach at Project Syndicate:
Inequality insurance would require governments to establish very long-term plans to make income-tax rates automatically higher for high-income people in the future if inequality worsens significantly, with no change in taxes otherwise. I called it inequality insurance because, like any insurance policy, it addresses risks beforehand. Just as one must buy fire insurance before, not after, one’s house burns down, we have to deal with the risk of inequality before it becomes much worse and creates a powerful new class of entitled rich people who use their power to consolidate their gains.
In 2006, I co-authored a draft paper with Leonard Burman and Jeffrey Rohaly of the Urban Institute and Brookings Institution’s Tax Policy Center that analyzed variations on such a plan. In 2011, Ian Ayres and Aaron Edlin proposed a similar idea.
Underlying such plans is the assumption that some substantial degree of inequality is economically healthy. The prospect of becoming rich clearly drives many people to work hard. But massive inequality is intolerable.
Of course, there is no guarantee that an inequality-insurance plan will actually be carried out by governments. But they are more likely to follow such plans if they are already legislated and take effect gradually, according to a formula known in advance, rather than suddenly in some revolutionary departure from past practice.
To be truly effective, increases in wealth taxes – which fall more on highly mobile retired or other affluent people – would have to include a global component; otherwise, the rich would simply emigrate to whichever country has the lowest tax rates. And the unpopularity of wealth taxes has impeded global cooperation. Finland had a wealth tax but dropped it. So did Austria, Denmark, Germany, Sweden, and Spain.
Read Inequality Disaster Prevention here.
In the Ted Talk below, William Black teaches us that robbing banks does not tend to bring the robbers a lot of money. Unless the people who are robbing the banks are inside the banks. And we don't mean the tellers.
Black is a former bank regulator. And he estimates that the bank "robbers" he's worried about made off with about 11 trillion dollars.
The OECD's Better Life Index has been updated with 2013 data. Overall, most countries look to come in with higher well-being ranks. Another year of recovery (albeit not fast enough for some), seems to have had a positive effect. Giving equal weight to all 11 criteria, the top ten countries come in as Australia, Norway, Sweden, Denmark, Canada, Switzerland, U.S., Finland, Netherlands, and New Zealand.
Once again, the U.S. comes out well when we give greater weight to income, housing, and jobs.
But here are the ranking if we focus on on life satisfaction, health, and work-life balance:
Explore the updated Better Life Index here.
If you have not had the opportunity to read Tim Geithner's Stress Test yet, and/or you have no intention of reading it but you want to know what he is arguing, you are in luck. The former Treasury Secretary has been making the rounds, so most of the key points of the book are out there in the public sphere already. For example, he sat down with Charlie Rose, and whether you are a fan or not of one Mr. Rose and the follow-up questions he neglected to ask, the long form interview allowed the two of them to cover a lot of ground.
Here is one excerpt in which Geithner defends his, and the Bush and Obama administrations', responses to the global economic meltdown of 2008.
And in this excerpt, Geithner talks about what he got wrong in 2008 (though he talks more about insufficient tools at his disposal rather than "mistakes," per se):
Watch the full interview here.
The Consumer Price Index for All Urban Consumers rose 0.3% in April, according to the Bureau of Labor Statistics.
The CPI-U has grown in eleven of the last twelve months (in October it
came in at 0.0). The all items index has grown 2.0% over the last 12
months. From the Bureau of Labor Statistics release:
The indexes for gasoline, shelter, and food all rose in April and contributed to the seasonally adjusted all
items increase. The gasoline index rose 2.3 percent; this led to the first increase in the energy index since
January, despite declines in the electricity and fuel oil indexes. The food index rose 0.4 percent for the
third month in a row, as the index for meats rose sharply.
The index for all items less food and energy rose 0.2 percent in April, with most of its major
components posting increases, including shelter, medical care, airline fares, new vehicles, used cars and
trucks, and recreation. The indexes for apparel, household furnishings and operations, and personal care
were all unchanged in April.
The all items index increased 2.0 percent over the last 12 months; this compares to a 1.5 percent increase
for the 12 months ending March, and is the largest 12-month increase since July. The index for all items
less food and energy has increased 1.8 percent over the last 12 months. The energy index has risen 3.3
percent, and the food index has advanced 1.9 percent over the span.
Here's a look at the CPI for All Urban Consumers over the last year:
We don't know of any performance reviews that measure how often an employee laughed at work or made her colleagues laugh. And frankly, we're scared of what that might bring about (call it the Michael Scott effect). But increasing the frequency of smiles, guffaws, and giggles is not only a worthy goal, according to A.J. Jacobs and Peter McGraw, it is essential to success. In this interview with Knowledge@Wharton's Adam Grant, Jacobs and McGraw discuss the time and place for humor at work, and why it is a necessary element of a successful work environment:
Young workers who went to college no doubt enjoy the vast wealth of knowledge and fond memories from their university experience. They also carry around another strong reminder of their time--at least many of them do--enormous student debt. But it seems that workers under 30, with or without student debt, are not following the script when it comes to taking on more debt and buying homes. Meta Brown, Sydnee Caldwell, and Sarah Sutherland of the New York Fed take a look at the recent data that shows a reluctance to get into the housing game: From Liberty Street Economics:
Despite an 11 percent house price recovery over the course of 2013 and an increase in overall mortgage debt, thirty-year-olds with and without student loans continued to retreat from the housing market.
Further, student borrowers failed to exhibit the differential recovery one might expect in 2013. Prior to the most recent recession, homeownership rates were substantially higher for thirty-year-olds with a history of student debt than for those without. This pre-recession pattern is typically explained by the fact that student debt holders have higher levels of education on average, and hence, higher income potential. Simply put, these more educated, often higher-earning, consumers were more likely to buy homes by the age of thirty.
However, the recession brought a sudden reversal in this relationship. As house prices fell, homeownership rates declined for all types of borrowers, and declined most for those thirty-year-olds with histories of student loan debt. In last year’s blog, we reported that 2012 was the first time in at least ten years that thirty-year-olds with no history of student loans were actually more likely to have home-secured debt than those with a history of student loans.
Did student borrowers regain their homeownership advantage in the course of the broader recovery? They did not. Surprisingly, student loan holders were still less likely to invest in houses than nonholders in 2013, despite the marked improvements in the aggregate housing market.
Read the full post here.