Markets, Retirement, Economy

Economic Data Roundup (05/06/2020)

5/6/20 8:00 AM

Updated data from the U.S. Census Bureau revealed that the homeownership rate in America, i.e. the proportion of owner-occupied households in this country, ended the first quarter of 2020 at 65.3 percent. That is the highest reading since Q3 2013 and represents a marked rebound from the half-century low hit during Q2 2016. The recent improvement has been driven in part by the growing number of aging Millennials that are getting married and having kids (household formation), and this demographic stimulus will remain in place long after the current coronavirus disruptions fade. The uptick in homeownership is also encouraging because for many Americans a house is a key tool for growing their net worth. In fact, a new Gallup poll found that more than one in three U.S. adults view real estate as the best long-term investment vehicle.


This is not too surprising since a house is a tangible asset and homeownership is perhaps conceptually more straightforward than investing in equities and fixed income. Ideally, though, Americans should utilize a combination of real estate, stocks, bonds, and other asset classes to diversify their wealth. Doing so can help lessen their financial sensitivity to economic and market downturns, especially if some of their assets are relatively illiquid. A home equity line of credit can be viewed as a more liquid alternative to trying to sell a home quickly during a recession, However, HELOCs are only available to those with sufficient equity, and sadly an updated Kaiser Family Foundation study estimated that half of all Medicare beneficiaries had less than $75,350 in home equity in 2019, and more than a quarter had no home equity at all. This should not only provide more motivation to pay off your mortgage before retirement but also to continue to make regular contributions to your 401(k) and other tax-advantaged savings plans.




Sources: Econoday, U.S. DoC, Gallup, KFF, Urban Institute, FRBSL

Post author: Charles Couch