In fact, American use a large fraction of their savings to buy houses. In a recent study, Arthur Kennickell and Martha Starr-McCluer reported that, in 1992, the median holdings of financial assets such as checking deposits, savings accounts, bonds, CDs, mutual funds, life insurance, and stocks were $24,000 among homeowners. In contract, the median value of a primary residence among homeowners was nearly $82,000, and the median value of their total debt (including mortgages and home equity loans) was only $38,000. Clearly, a large chunk of the typical homeowner's lifetime savings is tied up in the family house. Since 64% of American households are homeowners, the importance of home equity to household assets is beyond doubt.

This article appeared in the September/October 1996 edition of Business Review.

View the Full Article