Recent years have seen a sharp rise in the number of negative equityhomeowners—those who owe more on their mortgages than theirhouses are worth. These homeowners are included in the offi cialhomeownership rate computed by the Census Bureau, but the savingsthey must amass to retain their home or purchase a new home aredaunting. Recognizing that these homeowners are likely to convertto renters over time, the authors of this analysis calculate an“effective” rate of homeownership that excludes negative equityhouseholds. They argue that the effective rate—5.6 percentagepoints below the offi cial rate—may be a useful guide to the futurepath of the offi cial rate.
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