Home / News / Foreclosure / The Recession’s Impact on Confidence in Homeownership
Print This Post Print This Post

The Recession’s Impact on Confidence in Homeownership

While younger folks are oftentimes viewed as being more prone to taking risks than more elderly people, a study found that this idea doesn't ring true when it comes to buying a home during an economic downturn.

[IMAGE]

The ""study"":http://www.bostonfed.org/economic/ppdp/2012/ppdp1204.htm was authored by economists from the Federal Reserve Bank of Boston, Anat Bracha and Julian C. Jamison, and examined how the recession affected attitudes toward homeownership.

The study found that people who lived in hardest-hit ZIP codes in 2008 were significantly more likely to be confident about owning a home if they are older (over 58), but are significantly less likely to be confident about owning a home if they are younger.

According to the authors, one reason for this is because younger respondents have more malleable perspectives, whereas older respondents have a worldview that is more difficult to alter. Thus, older respondents may simply interpret the house price drop as a temporary dip in a market that is bound to become stable again, making the downturn a good time to purchase.

A chart in the report showed that the greater the drop in home prices, the less confident individuals under 58 were in the soundness of buying a home. With older individuals, the bigger the drop in prices, the more confident they were in the idea of buying a home.

The study also examined the effects of simply knowing about the recession's impact versus first-hand experience and how this changes attitudes toward homeownership. The authors found that having information about the market crash is not enough to change individual attitudes. Instead, one must have experienced the crises either by personally enduring a hardship from it or witnessing someone close to them suffer.

""Even an extremely negative experience such as the Great Recession, the worst U.S. economic crisis since the Great Depression, was not enough to shift the attitudes of those who lived through the crisis-and thus had full access to information on its effects-but did not have strong first- or second-hand experience of these adverse effects,"" the authors wrote.

The study found that older individuals who experienced a market crash were actually more confident in the idea of buying a home over renting, whereas the younger group of adults who had experience with the real estate crash were marginally less confident in the benefits of owning.

About Author: Esther Cho

x

Check Also

Federal Reserve Holds Rates Steady Moving Into the New Year

The Federal Reserve’s Federal Open Market Committee again chose that no action is better than changing rates as the economy begins to stabilize.