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"A new generation of Americans may eschew homeownership altogether after witnessing fallout from the housing bubble, said James Bullard, president and CEO of the Federal Reserve Bank of St. Louis.
Bullard made that assertion while commenting on a paper titled, "Housing, Monetary Policy, and the Recovery" during the U.S. Monetary Policy Forum under way Friday in New York City. The paper was written by Mike Feroli (JPMorgan Chase), Ethan Harris (Bank of America), Amir Sufi (University of Chicago Booth School of Business), and Ken West (University of Wisconsin).
Bullard, commenting on the paper's findings, said a major shift is under way, reshaping the old story of homeownership as the ultimate American dream.
"The current cohorts of new homebuyers likely see homeownership as a fundamentally riskier proposition than earlier cohorts, and therefore may be more likely to rent than own," he said. "Such a theory may suggest a more permanent shift to renting."
Bullard also warned that Americans with outstanding mortgage debt are weighed down by excessive debt levels.
Of the 75.3 million American homeowners, 49.4 million had debt outstanding in the most recent third quarter.
Altogether, these homes had $712 billion of equity to support close to $10 trillion in mortgage debt."
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The Senate Budget Committee also notes that our debt per capita would rise to $75,000 by 2020 if Presdient Obama's budget became law."
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