Abstract
In this study, I investigated the homeownership decisions of young adult children who experienced parental foreclosure. Results from a linear probability model using data from the Panel Study of Income Dynamics showed that young adults were less likely to become homeowners following parental foreclosure and that foreclosures between 2009 and 2011 had the strongest negative effects. Young adults who lived in low-foreclosure states, who lived outside their parents’ county, and who were more financially prepared were affected more. This evidence suggests that the parental foreclosure effect was unlikely to operate through common economic shocks at the state or county level or through parental financial transfers, implying potential psychological effects of parental foreclosure. These findings reveal an intergenerational correlation of negative housing experiences and highlight the importance of designing and providing counseling services not only for owners of foreclosed homes but also for their family members.
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Notes
Those reporting homeownership and parental foreclosure in the same wave were included in the sample. In this case, there was no way to distinguish whether an adult child bought a house either before or after the parents were foreclosed in between the current and previous waves. However, including these cases biased the results toward finding no negative effect of homeownership; hence, the effect measured in this study can be interpreted as a lower bound of the true effect.
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Acknowledgements
The author thanks Minhong Xu for excellent research assistance and the participants at the 2016 Conference of the American Council on Consumer Interests (ACCI) for helpful comments. The research project was partly funded by the National Institute of Food and Agriculture (NIFA) at the United States Department of Agricultural (#ILLU-470-367).
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Xu, Y. Foreclosed American Dream? Parental Foreclosure and Young Adult Children’s Homeownership. J Fam Econ Iss 41, 458–471 (2020). https://doi.org/10.1007/s10834-020-09665-0
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DOI: https://doi.org/10.1007/s10834-020-09665-0