American Consumers Newsletter

by Cheryl Russell, Editorial Director, New Strategist Press
February 2008

Most Homeowners Are Not in Trouble

4. New from New Strategist: New books link to spreadsheets for every table!


Most Homeowners Are Not in Trouble

“Tapped-Out Consumer” was the recent headline in a Business Week article about the unfolding housing crisis. The New York Times chimed in with the sweeping claim that “Everyone from first-time homebuyers to Wall Street chief executives made bets they did not fully understand, and then spent money as if those bets couldn’t go bad.”

Everyone made bets? Time out. Let’s check those breathless reports from the frontlines of the housing crisis.

In fact, the unfolding housing crisis is hurting only a tiny percentage of homeowners. To get a realistic perspective, you have to look beyond the numeratorthe people in trouble. You must also consider the denominatorthe total number of homeowners. The denominator is a HUGE number. Last year there were 75 million homeowners in the United States. Few of them are in trouble.

Here’s why: nearly one-third of the nation’s homeowners24 millionown their home free and clear. That means they have no mortgage, no home equity loans, and are in no danger of foreclosure. While the decline in housing values may make them uncomfortable, it will not affect their bottom line unless, for some reason, they have to sell their house before housing prices resume their historically slow upward climb.

Things are not all that bad for the 51 million homeowners with a mortgage either. Most have managed their asset wisely. Unfortunately, the same cannot be said of the nation’s financial institutions, which is the reason our economy is on the brink of recession. Let’s look at the facts.

1. Most homeowners with a mortgage have a traditional loan. Fully 81 percent of homeowners with mortgages have a fixed-rate loan with a median interest rate of just 6 percent.

2. Most homeowners have a substantial cushion of equity in their home, a cushion that will protect them from all but the most catastrophic price drops. Homeowners with a mortgage owe, on average, only 55 percent of their home’s valueleaving room for a substantial price decline before they are in hot water.

3. Most homeowners have NOT used their home as an ATM machine. Only 13 percent of the nation’s 75 million homeowners even have a home equity loan. This fact bears repeating because the media narrative has “everyone” spending down their housing equity on granite countertops and large-screen TVs. To repeat, more than 85 percent of the nation’s homeowners do NOT have a home equity loan.

Of course, in a housing market as large as ours, even a small percentage in trouble means millions are drowning. Only 3 percent of homeowners with a mortgage owe more than their house is worth, for example, but that 3 percent amounts to 2.5 million homeowners. But these numbers are a far cry from “everyone.” Everyone did not make foolish bets, but the unfolding crisis shows that everyone will be hurt by the few homeowners and the many financial institutions that did.

By Cheryl Russell, editorial director, New Strategist Publications
If you have any questions or comments about the above editorial, e-mail New Strategist at



Median amount owed by the average household (including mortgage debt): $55,300.


2. Q & A

What’s in Store for Books?

Grab your hankies and prepare to weep. A National Endowment for the Arts report warns of a decline in book reading over the past decade. The percentage of adults who have read a book for pleasure (not required for work or school) in the past year fell from 61 percent in 1992 to 57 percent in 2002down 4 percentage points. Is this decline a cause for concern or, rather, a sign of the book’s staying power? To get a better perspective, let’s look at what has happened to two other traditional media outletsthe daily newspaper and the network evening news.

Between 1991 and 2002, the percentage of people who read a newspaper every day fell from to 52 to 41 percenta much larger decline than the one experienced by books. Even more telling, since 1990 unit sales of trade books have increased, while weekday newspaper circulation has decreased. Yes, average household spending on books has dropped. It fell by a painful 28 percent between 1991 and 2006, after adjusting for inflation. But much of the decline in spending can be explained by the growing sales of used books and the deep discounts offered by and other Internet retailers. No such benign factors can explain why household spending on newspapers and magazines fell by a heartrending 60 percent during the same years.

Network evening news is also experiencing a precipitous decline. The average number of people who watch the network evening news plummeted from 42 million to 30 million between 1992 and 2002. Not only is the audience shrinking, it is also aging. The median age of the viewers of evening news has now surpassed 60.

The fact is, the percentage of people reading for pleasure has remained remarkably stable over the past decade considering the enormous expansion of television channels and the adoption of computers and the Internet. Even more important, the demographics of book readers are healthy. Young adults are almost as likely as older Americans to be regular book readers. Forty-three percent of busy 18-to-24-year-olds have read a work of fiction in the past year, not too far below the peak of 52 percent among 45-to-54-year-olds. Contrast that 9 percentage point gap with this one: only 18 percent of 18-to-29-year-olds regularly watch network evening news compared with the peak of 56 percent among people aged 65 or oldera gap of 38 percentage points. Or this one: only16 percent of 18-to-29-year-olds read a newspaper every day compared with 66 percent of people aged 65 or older, a gap of 50 percentage points.

Newspapers and network evening news are being supplanted by more efficient ways of getting up-to-the-minute information. Some claim electronic devices such as Kindle will replace books. But handheld electronic devices are no more likely to replace books read for pleasure than video screens have replaced original art, virtual tours have replaced travel, or pills have replaced food.

By Cheryl Russell, editorial director, New Strategist Publications
If you have any questions or comments about the above Q & A, e-mail New Strategist at



Rank of cable TV service among the items on which the average household spends the most: 22.



To keep up-to-date on ever-changing demographics and lifestyles, check out these useful web sites.

Population projections
Anyone familiar with the Census Bureau’s population projections based on the 2000 census knows those numbers are growing stale because of greater than anticipated Hispanic immigration. The Pew Research Center has come to the rescue. It has produced projections of the total and Hispanic populations in broad age groups at 10-year intervals through 2050. The projections show the total U.S. population growing to 438 million by 2050 (compared with the Census Bureau’s projection of 420 million), with Hispanics accounting for 29 percent of the total (compared with the Census Bureau’s 24 percent).

Military demographics
From this web page, you can access a variety of reports on the demographics of the Army, including annual profiles of the Army; special reports on blacks, Hispanics, and Asians in the Army; and a 20-year retrospective on the Army’s demographics. In addition, the site includes links to demographic reports on the Air Force, the Navy, the Marines, the U.S. Coast Guard, and the National Guard.



Percentage of adults who say their health is excellent or very good:
Total people: 55
Hispanics: 36



New Strategist’s reference books and reports offer a useful new feature for researchers who want to do their own analysis or create a chart or PowerPoint presentation on consumer trends. Starting in 2008, all new titles are available as downloadable pdfs with every table linked to a spreadsheet version

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Visit our web site and check out our new titles in 2008, which bring you the facts about American consumers and how they spend. New Strategist has done the work for youour editors spent hundreds of hours scouring web sites, compiling numbers into meaningful statistics, and creating tables with calculations that reveal the trends.


These three volumes, which can be purchased individually or as a set, give you the real facts about one in three Americans.