Neal's Workshop

This graph represents the Household Home Mortgage (Debt) data divided by the Household Real Estate (Asset) data as published in the Federal Reserve's B.100 schedules. The greater this proportion, the less equity Americans have in their homes.

The common attitude towards home equity has clearly changed since the 1940's. The ratio of liability to asset has gone from a respectable 16% in 1945 to questionable 44% in 2005, almost tripling.

These changes bring to mind a few questions. Do you really "own" your home if ownership means indebtedness for the majority of your life? What is the difference between renting and owning? With Americans indebted more than ever before, as illustrated yesterday, are modern Americans buying their homes actually expecting they will ever fully own them? If home ownership is so desireable and important, why does the government encourage Americans to maximize mortgage debt (rather than the paydown of such debt) via mortgage interest tax deductions?

What is really going on here?