30% of late baby boomers owe more than their homes are worth
And here's the most startling statistic: "Nearly 30% of late baby boomers will need to bring cash to a closing to cover their outstanding mortgage and transactions costs."
In the press release, the CEPR lamented that "Plummeting house prices and investment losses will leave millions of Baby Boomers dependent on Social Security in their retirement." The report (PDF) states that "Finally, the projections show that for both age groups, the renters within each wealth quintile in 2004 will have more wealth in 2009 than homeowners in all three scenarios. In the second and third scenarios, renters will have dramatically more wealth in 2009 than homeowners who started in the same wealth quintile. Homeownership is not everywhere and always an effective way to accumulate wealth. For those who owned a home in the last few years, the collapse of the housing bubble led to the destruction of much or all of their wealth."
That seems more surprising than it is, and CNN twisted the data by reporting that "The CEPR also found that people who were renting homes in 2004 will have more wealth in 2009 than those who were owners."
That seems amazing given that according to a 2004 Federal Reserve study, the average renter had a net worth of $4,000 while the average homeowner's net worth was $184,000.
Those two data points seem to be in conflict, but that's only because the CEPR research has been misreported. What that data really shows is that the few wealthy people who didn't own homes in 2004 are now wealthier than similarly wealthy people who did. Similarly, poor people who didn't own homes in 2004 are now less poor than similarly poor people who did. That's really not at all surprising given the rout that has taken place in housing. But over the long-term, home ownership has been the best path to accumulating wealth and think about it: Many of the people in that top 10% of net worth wouldn't have gotten there without home ownership in the first place, but that isn't factored into the data at all.
There's nothing wrong with the data that's been released by CEPR.. But using it to make the argument that home ownership isn't a way to build wealth -- as Peter Schiff does -- because of a few years of unprecedented market weakness is pretty lame, and families who opt to stay in rentals are foregoing what has historically been a tremendous way to build net worth.