Perception vs. reality: The relationship between low-income homeownership, perceived financial stress, and financial hardship

This research examines how homeowners and renters were impacted by the financial crisis in 2009. We build from the hypothesis that homeownership provides people a sense of stability which decreases the extent to which they feel stressed as a result of financial hardship. Our study tests whether owning a home affected either the degree to which lower-income households experienced financial hardship or the extent to which they perceived they were financially stressed. Using a sample of lower-income borrowers who obtained affordable mortgages through the Community Advantage Program (CAP) and a comparison panel of renters, we collected data on the effects of the financial crisis. From a portfolio performance standpoint, CAP loans have performed relatively well. Our analysis of the survey data finds that, although both renters and owners experienced similar levels of financial hardship, the homeowners were less psychologically stressed overall and reported feeling more satisfied with their financial situation.

► We model relationships between homeownership and stress during the financial crisis.
► We use a variety of statistical methods to account for selection bias.
► Homeowners experienced no more financial hardship than renters in 2009.
► Homeowners had lower levels of general stress and felt more satisfied financially.