Federal Reserve Report on Household Economic Well-Being

According to a Federal Reserve analysis, U.S. households surveyed during October 2014 reported only modest improvements with respect to economic well-being but felt increasingly optimistic about the future.

The Survey of Household Economics and Decisionmaking (SHED), first conducted in 2013, complements the triennial Survey of Consumer Finances, the Federal Reserve’s key report on household wealth.

Among the housing-focused findings of the report:

  • 74% of homeowners reported “doing okay” or “living comfortably,” in contrast to only 48% of renters
  • 10% of respondents reported living with parents, compared to 5% who are living with a roommate

The report details a number of motivations for renting a home, including challenges associated with attaining homeownership:

  • 81% of renters indicate that they would prefer to own if they could afford to do so
    • 50% of renters reported that they lack the funds for a downpayment
    • 31% of renters noted that they could not qualify for a mortgage
  • Among other reasons for renting:
    • 27% of renters revealed it was cheaper for their household
    • 25% thought renting was more convenient
    • Only 12% preferred renting
  • 9% of current renters are actively looking to buy a home

There were noticeable differences among income classes for reasons to rent:

  • For renters earning less than $40,000 a year:
    • 35% reported they were unable to qualify for a mortgage
    • 52% indicated that they could not amass a downpayment
  • For renters earning more than $100,000 a year:
    • 39% believed renting was more convenient
    • 17% preferred renting to owning
    • 29% planned on moving in the near-term

There were also differences across age classes:

  • For renters ages 18 to 29:
    • 36% plan on moving soon
    • 13% were looking to buy
  • For renters above age 60:
    • 35% found it cheaper to rent
    • 26% preferred renting over homeownership

Among homeowners, the median tenure of homeownership was 12 years. As to reasons for owning a home:

  • 44% said ownership allowed building home equity
  • 20% liked the certainty associated with costs
  • All total, 67% of homeowners preferred owning for financial reasons
  • 83% also cited at least onenonfinancial reason
    • 72% simply preferred to own
    • 43% noted there are fewer rules and more ability to customize their residence
    • 23% revealed they did not like moving

Most homeowners expressed optimism regarding home values:

  • 43% thought their home gained value over the prior year
  • Only 6% believed their home would lose value over the next year

The survey found that 14% of mortgage holders reported owing more than the value of their home however.

The survey also provided another data point concerning sources of downpayments. For buyers purchasing between 2011 and 2014:

  • 52.6% used personal savings
  • 29.3% used equity from a previous home
  • 15.3% used a loan/gift from family/friends

Because the survey followed-up on an earlier 2013 study, additional year-over-year findings were also available:

  • Only one-third of renters in 2013 who noted they were looking to buy actually purchased a home (and only 3% of renters who reported not looking in turn made a purchase)
  • Among households who transitioned to renting, many viewed it as a short-term situation
    • 26% of new renters who owned a home in 2013 were looking to buy
  • Among renters who previously owned a home, only 17% reported renting was more convenient

 

In terms of non-housing findings, households had modest expectations:

  • 65% of households noted they were doing “okay” or living comfortably”
  • 49% of part-time workers preferred to work more hours at their current wage
  • 29% of households expected income growth in the coming year (compared to only 21% in 2013)

The Federal Reserve analysis stated that households faced fragile economic conditions, with 47% of survey respondents stating that they could not cover an emergency expense of $400. One-fifth of households revealed that their spending exceeded income over the prior year. 23% of adults also reported having student loan debt.

With respect to retirement, 39% of currently non-retired households noted thy have given no or little thought to financial planning and 31% had no savings or pension.

 

 

 

 

 

 



Tags: , , , ,