Lots of American families are underwater...and not just on their mortgages.
About one out of every five U.S. households owe more on credit cards, medical bills, student loans and other debts not backed by collateral than they have in savings and other liquid assets, according to a new University of Michigan report published Tuesday.
The precariousness of Americans' financial situations has become increasingly on display since the mortgage crisis precipitated the Great Recession. As home prices fell, many borrowers found they owed more than their homes were worth, spurring some to simply walk away. About 23% of borrowers were underwater at the end of 2011, according to CoreLogic.
Though the Great Recession has ended, many families remain in tough financial spots.
"Some families have not been able to make substantial headway," said Frank Stafford, co-author of the report. "Even if they're not underwater with their mortgages, they are struggling to save money and reduce their debts."
The Michigan report found that 23.4% of families had no savings or other liquid assets in 2011, up from 18.5% two years earlier. But the number of families with more than $50,000 in liquid assets also grew to 14.6%, up from 11.8%.
And the number of families who owe at least $30,000 in credit card and other debts grew to 10%, up from 8.5%. Part of this increase is the jump in student loans.
"It's a classic response to economic uncertainty," Stafford said. "But the problem is that today only those families who have more than $50,000 in liquid assets have actually been able to do this to any extent. The rest of American families are simply treading water, if they're lucky."
The chorus is getting louder.
A growing number of community groups and politicians are calling for the ouster of Ed DeMarco, the chief regulator of Fannie Mae and Freddie Mac.
They see him as the chief roadblock to getting the government-run mortgage finance companies to allow principal reduction, which many experts say is critical to reviving the housing market.
At issue is lowering the mortgage balances of homeowners who owe more than their MORETami Luhby - Mar 16, 2012 8:18 AM ET
Foreclosure sales are on the rise, even in states where banks need court approval to foreclose on a home.
Sales rose to 91,000 in January, up 29% from the month before, according to LPS Mortgage Monitor.
Foreclosure sales are when a bank completes the foreclosure process and takes possession of the home.
Experts have been closely monitoring foreclosure activity for signs of a resurgence.
Foreclosure sales had dropped in the fall of 2010 after MORETami Luhby - Mar 6, 2012 9:06 AM ET
More home buyers are bringing cash to the table these days.
All-cash transactions hit a record 34.1% of all home purchases last month, according to Campbell/Inside Mortgage Finance HousingPulse Tracking Survey. That's up from 29.4% a year go.
"Despite near record low mortgage rates, homebuyers are finding it very advantageous in the current housing market to shop with cash," according to the survey. "And low returns on money deposited in banks as MORETami Luhby - Feb 29, 2012 4:17 PM ET
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