Pew Research Center recently released a chart detailing the demographics of the 21 percent of mortgage holders who are underwater:
To summarize: If you’re underwater, you’re more likely to be:
- Hispanic than white or black alone
- Unemployed than employed
- Living in the West
- Age 30-49 rather than other cohorts
- Earning less than $30,000 per year
Some of this is not surprising: if you earn less than $30,000 per year, you probably have less ability to save for a down payment and probably have a higher LTV than someone in a higher bracket, though of course that’s not always the case.
What surprises me is the age cohort. Owners ages 30-49 AND owners age 50-65 are both more likely to be underwater than owners age 18-29! The only explanation I have is that owners age 18-29 were more likely to buy smaller, cheaper houses or apartments and could not afford (or did not yet think they needed) the extravagence of a new McMansion in a gated community. They didn’t get up as high, so they don’t have as far to fall.
But ages 35 to 50 are your prime earning years. This is when you are into the heart of your career, hitting the top of your potential, making solid preparation for your future and your kids’ futures. If you’re already 50 and you have negative home equity, then you are in a serious financial hole. For a lot of people, retirement is going to be a lot more uncomfortable than they imagined.
DISCLAIMER: The study was performed on mortgage holders. Many people–they don’t make the news a lot–have paid off their mortgages by middle age. I know many who have done so. By contrast, I don’t know any 29 year-olds who have. So the survey was not among all homeowners, but among all mortgage holders. Still, the number, if true, is frightening.