The voices of Urban Institute's researchers and staff
March 28, 2016

The housing bust hit middle-aged former homeowners hardest

March 28, 2016

Our latest report shows that 19 million of current US renters used to be homeowners. Nearly a quarter of them (4.2 million) lost their homes to foreclosures. And a closer look reveals that a disproportionate share of these struggling former homeowners is middle aged, between ages 36 and 55.

Middle-aged former homeowners have the highest foreclosure rates. Nearly 31 percent (1.3 million or )of former homeowners ages 36 to 45, and 26 percent (1.2 million) of those ages 46 to 55 saw foreclosures, accounting for almost one-third of all foreclosures between 2003 and 2015.

Middle-aged former homeowners have lower credit scores than older former homeowners. The median credit score of all former homeowners is 665, while those younger than 65 tend to have median scores between 640 and 680. Those older than 65 have a much higher median score at 750.

Almost one-third (5 million) of those former homeowners have negative public records, a far higher share (28 percent) than any other adult consumers; and most of these (4 of the 5 million) are middle aged. Negative public records include bankruptcies, judgments, and tax liens collected from public record sources; many of these items are consistent with a foreclosure proceeding. These records may also include outstanding federal or governmental agency debts, such as defaulted student loans, federal tax liens, unpaid child/family support, and other miscellaneous debts.

More than one-third (7 million) of former homeowners have debt in collections, a far higher share than any other tenure-mortgage groups, except renters who have never had a mortgage. Again, most of these (4 of the 7 million) are middle aged.

 

Why did the middle aged fare so poorly in the housing bust?

Younger borrowers most likely obtained their mortgages after the financial crisis when home prices were appreciating rather than depreciating. Older consumers are most likely to have paid off either all or part of their mortgages before the financial crisis, giving them more equity in their homes and making the housing burden more manageable. But those ages 36 and 55 in 2015, particularly those under age 46, most likely obtained their mortgages at or near the peak of the housing cycle in 2005, when they would have been in their mid-twenties to mid-thirties, turning many of them into particularly hard-hit victims of the housing bust.

Carl Chua talks about losing equity on the home he owns in the Weston Area in Stockton, California, Tuesday, Nov. 6, 2012. Chua volunteered his home as a polling station and says he has seen several neighbors lose their homes to foreclosure. Photo by Marcio Jose Sanchez/AP

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