Have Boomers Become Former Homeowners?

Most Boomers haven't saved enough to retire in comfort. Some haven't saved at all. But not to worry – they're building affluence through the homes they own.

On second thought, maybe it is time to start worrying.

Check out "A False Sense of Security? You Must Own a Home" in The New York Times:

Never before have homeowners actually had such a small ownership stake in the houses they occupy.

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Using one’s home as an A.T.M., as economists like to say, has become so easy since the 1980s that it is hard to kick the habit. Home equity loans proliferated, giving families a readily available line of credit, and government encouraged lenders to reach out to low-income families, allowing them to qualify for mortgages with little (sometimes no) down payment. Mortgage lenders shed their caution, able to sell sketchy home loans on Wall Street and pass on their default risk to other investors (the perils of which have been exposed in the recent Bear Stearns debacle).

The tax code has played its own special role in all of this. Congress changed the law in 1986, allowing individuals to deduct on their tax returns only those interest payments on loans tied to housing. Interest on other loans no longer qualified. With that big change, borrowing against one’s home to buy a car or an appliance or clothing or a vacation became cheaper, after taxes, than standard consumer credit.

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The culture of “own your home free of debt as soon as possible” had endured for decades. Through the 1960s and ’70s, owners’ equity ranged from 65 to 70 percent. As recently as 1983, some 52 percent of American homeowners who were 55 to 65 years old owned their homes without any mortgage debt — allowing them to be free of monthly installment payments during their retirement years. By 2004, however, that percentage had dropped to 36 percent, according to Federal Reserve data.

What about it? Are some of your present or potential clients poorer than they look?