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Taking a closer look at household balance sheets before and after the recession, Emmons and Noeth find that
younger, minority and lessâ€educated families suffered the largest wealth losses during the economic crisis.
They use data from the Federal Reserveâ€™s triennial Survey of Consumer Finances (SCF) and find that these households held a large amount of real estate relative to their incomes and total assets, mostly in the form of
a primary residence, and had relatively little owners’ equity in their homes. Declining house prices had a relatively large impact on the net worth of these households,Â many of which simultaneously experienced job and income losses during the recession.
Similarly, using data fromthe SCF,Grinsteinâ€Weiss and Key find thatlowâ€wealth homeowners
owned relatively few nonâ€housing assets and were thus deeply exposed to the broad downturn in housing prices
during the recession.
In absolute terms, wealthier homeowners lost more home equity during the housing crisis,
but homeowners with lower initial net worth lost more as a proportion of their total wealth.
These trends at the household level have important macroeconomic implications.
Mian, Rao and Sufi find that poorer and more indebted households reduced their spending much more than their wealthierÂ counterparts in response to declines in housing net worth during the Great Recession.
Similarly, Dynan and Edelberg find thatafter the recession, households that were more indebted were more likely to report cutting back consumption, even after controlling for wealth, income, and other factors that would be expected to influence consumption.
Case, Quigley and Shiller find that changes in housing values exert a larger and more important impact upon
household consumption than do changes in stock market values. These studies suggest that the status of
household balance sheets, particularly the level and composition of household debt, have an influential impact on
aggregate consumption, which has been a factor in the slow economic recovery.