Family Finances after the Great Recession – Evidence from the Michigan Recession and Recovery Study
Ngina Chiteji, Skidmore College and Sheldon Danziger, University of Michigan
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While much attention has been focused on rising unemployment and falling earnings and income, less attention has been paid to household wealth, assets, and debts of families in the aftermath the Great Recession. An understanding of household balance sheets is important because this recession was also accompanied by a financial crisis, with large drops in stock market and housing prices. This research brief summarizes data on the assets and debts of a stratified, random sample of 914 adults between the ages of 19 and 64 who resided in the Detroit Metropolitan Area and were interviewed between October 2009 and March 2010 in the first wave of the Michigan Recession and Recovery Study .
The mean of total assets for all respondents (including those with no assets) is $195,746, with a median of $108,270. Because the distribution of asset ownership is skewed, with a small proportion of respondents having very high asset levels, the median is much lower than the mean. About 31 percent of respondents have a debt-to-asset ratio greater than 1, indicating that the total value of their debts exceeds the value of their assets. That is, they could not pay off all their debts even if they liquidated all of their assets, including their homes. About 48 percent of African Americans have zero or negative net worth, compared to 28 percent of non-black respondents. Median net worth (assets less debts) is $22,858 for all respondents, $1,434 for African-Americans and $33,311 for non-blacks.
Many respondents had difficulty paying their bills--26 percent of renters were late paying rent in the year prior to the interview, 10.2 percent of homeowners had fallen behind on their mortgage, and 14 percent of respondents were late making paying medical bills.
Employment, Unemployment, and the Labor Market, Urban Poverty