1959 SURVEY OF CONSUMER FINANCES

Transcription

1 959 SURVEY OF CONSUMER FINANCES Preliminary Findings of the 959 Survey of Consumer Finances The Financial Position of Consumers Housing of Nonfarm Families (Includei at end of articles a Hit of tables shoving their location by major subject areas) REPRINTED FEDERAL RESERVE FROM BULLETIN FOR MARCH, JULY, AND SEPTEMBER, 959 ISSUED BY THE BOARD OF GOVERNORS OF THE FEDERAL RESERVE SYSTEM WASHINGTON

2 Preliminary Findings of the 959 Survey of Consumer Finances EARLY THIS YEAR, consumers viewed their financial situations and prospects more favorably than a year ago, and the proportion who planned to make major expenditures during 959 was moderately larger than in early 958, according to the preliminary findings of the fourteenth annual Survey of Consumer Finances. This Survey was conducted in January and February 959 by the Board of Governors of the Federal Reserve System in cooperation with the Survey Research Center of the University of Michigan. Personal interviews with a representative sample of the consumer population provided information on consumers' financial positions, views about their own and general economic prospects, and their plans for purchasing durable goods and houses during the year. The recovery in economic activity that had occurred by early 959 was reflected in an increase from early 958 in the proportion of consumer spending units who These findings are based on preliminary tabulations of about 2,550 interviews taken, in January and February 959 in the 2 largest metropolitan areas and 54 other sampling areas throughout the country. Additional interviews and adjustments for differential response rates in various strata of the sample will be incorporated in the tabulations that will be published in later articles in the Federal Reserve BULLETIN. ID past years differences between preliminary and final data have been small. The Survey of Consumer Finances, like other sample surveys of this type, is subject to response as well as sampling errors. As a result of such factors, undue importance should not be attached to small changes in the data from year to year. For tables of sampling errors in Survey data see the Federal Reserve BULLETIN, September 958, pp said that they were earning more than a year earlier and a corresponding decrease in the proportion who said they were earning less. This improvement in rate of income was reported by all of the major occupational groups, and was reflected in a more favorable evaluation of individual financial positions. Nearly four in ten consumers reported that they were better off financially than a year ago, compared with one in three consumers in early 958. Consumers' views on their financial situations in early 959 were about the same as in early 955, but were slightly less favorable than those reported at the beginning of 956 and 957. The distribution of consumer income for 958 was similar to that in 957 and 956, with about two-fifths of all consumer units having incomes of $5,000 and over in each of the three years. In early 959 about three-fourths of all consumers held some liquid assets. This was about the same proportion as in the two preceding years. There were some declines in the size of holdings reported early this year, however, as the proportion of consumers with small holdings (under $200) increased and the proportion with intermediate-size holdings ($,000-$5,000) decreased. Early this year consumers were much more optimistic than a year ago about their earnings prospects and about general business conditions during the.coming year. More than four in ten consumers expected their earnings rate to improve over the year and less than one in ten expected it to de- 25 REPRINTED FROM FEDERAL RESERVE BULLETIN FOR MARCH 959

3 252 FEDERAL RESERVE BULLETIN MARCH 959 PRELIMINARY RESULTS OF THE FEDERAL RESERVE SURVEY OF CONSUMER FINANCES EARLY 959, WITH FINAL RESULTS FOR EARLY [Percentage distribution of spending units] Consumer financial positions Evaluation of own financial situation Better off than a year ago No change Worse off than a year ago Don't know, not ascertained All cases Past change in income rate 2 Making more than a year ago No change Making less than a year ago Don't know, not ascertained Money income in prior year, before taxes Under $, S.000-S $2,000-52, $3.000-$3, $4,000-$4, $5,000-$7, $7,500-$9, \. $0,000 and over All cases I 5 Liquid asset holdings 3 Zero Sl-$ $ $,000-$, $2,000-$4, $5,000-$9, $0,000 and over i Preliminary data for early 959 are based on the first 2,550 spending units interviewed and have not been adjusted for nonresponse. Data for previous years are based on complete surveys and adjusted for nonresponse. i Based on data for nonfarm spending units only. 3 Liquid assets include U. S. Government savings bonds, checking accounts, savings accounts in banks, and shares in savings and loan associations and credit unions; currency is excluded. Data prior to 959 include postal savings accounts, which were hold by less than 2 per cent of all spending units in 958. Data prior to 957 include also marketable II. S. Government bonds, which were held by about t per cent of all spending units in 957. * Dr.ta not available. ' Data are based on question: "Now considering the country as a whole, do you think that during the next 2 months we will have good times or bad times, or what?" Spending units that reported they would, probably would, or possibly would buy, or that bad already bought, in Survey year. i Includes only planned expenditures of 50 or more.» Data for automobiles are based on planned expenditures of spending units that reported they would or probably would buy or bad already bought; data for other items include, in addition, planned expenditures of spending units that reported they possibly would buy. Medians shown are interpolated from bracket amounts starting m 952.

4 959 SURVEY OF CONSUMER FINANCES 253 PRELIMINARY RESULTS OF THE FEDERAL RESERVE SURVEY OF CONSUMER FINANCES EARLY 959, WITH FINAL RESULTS FOR [Percentage distribution of spending units] Consumer plans and expectations W Expected change in income rate 2 Making more a year from now ( 4 ) No change ( 4 ) Making less a year from now ( 4 > Uncertain, not ascertained ( 4 ) All cases < 4 > Expected general business conditions 5 Good times C) ( 4 ) ( 4 ) ( 4 > ( 4 ) ( 4 ) Bad times ( 4 ) ( 4 ) C 4 ) Uncertain, not ascertained ( 4 ) C 4 ) ( 4 ) All cases ( 4 ) ( 4 ) ( 4 ) Expected price movements for consumer goods Increase during year 6 48 (*) ( 4 > ( 4 ) No change Decrease during year 6 3 Uncertain, not ascertained < ( 4 ) All cases ( 4 ) ( 4 ) ( 4 ) Plans to purchase * Houses Home improvement and maintenance 2 7 New automobiles ( 4 ) 6.8 ( 4 ) 6.6 ( 4 ) 0.6 ( 4 ).8 ( 4 ) 9.7 Used automobiles Furniture and major household appliances Median planned expenditure 8 $3,030 $2,840 $2,920 $2,80 $2,800 $2,570 $2,500 $2,340 $,970 $,920 $,990 $, Furniture and major household appliances Home improvement and maintenance ( 4 ) ( 4 ) ( 4 > C 4 ) C 4 ) ( 4 ) For notes see preceding pqgc.

5 254 FEDERAL RESERVE BULLETIN MARCH 959 dine. The outlook was a little more optimistic than in early 957 and considerably more optimistic than in most previous postwar years. This improvement in income outlook was general for most income and occupational groups. Consumer expectations about general business conditions during the coming year improved substantially from early 958, and were only slightly less optimistic than in the period. Early this year more than one-half of the consumers expected business conditions to be good during the coming year, while less than one-fifth said they expected bad times. For the most part, consumers also expect higher prices. Three-fifths of all spending units reported that they expect retail prices to rise during the year, and less than onetenth expect prices to decline. A year ago slightly less than one-half of consumers expected price increases. Except for a substantial rise in plans to buy houses, consumers' buying plans in general were only moderately above a year ago. The proportion of consumers planning to make expenditures on cars, on other durable goods, or on home improvement and maintenance increased to 50 per cent early this year from 47 per cent a year earlier, but the average planned expenditure declined moderately. The proportion of consumers reporting plans to buy new cars during the year rose from the relatively low level of early 958 but was still below the levels in the previous three years. The median price consumers expected to pay reached a new high of $3,030. While the proportion of consumers that planned to buy used cars was above that of most recent years, it was down from the high reached last year, and the median price consumers expected to pay was lower than a year ago. The proportion of consumer units with intentions of buying a house in 959 was much larger than last year and about as large as the previous high levels in 955 and 956. Nearly one-fourth of consumers reported that they intended to make expenditures on home improvements or maintenance. This was a larger proportion than in any other recent year, but the median planned expenditure was somewhat lower.

6 959 Survey of Consumer Finances The Financial Position of Consumers CONSUMER SPENDING for nondurable goods and services in 958 reached a new peak and was an important stabilizing factor during the recession. Expenditures for durable goods, on the other hand, were below the high levels of the preceding three years, as a result of reduced purchases of automobiles. With the decline in purchases of durable goods, consumer needs for credit declined, and the growth over the year 958 in short- and intermediate-term consumer credit outstanding was the smallest of the postwar period. Consumers purchased about the same number of new homes in 958 as they did in 957. Their net acquisition of financial assets was somewhat larger than in 957. and there were important shifts in the types of assets they were building up. The number of unemployed persons reached postwar highs in the spring and summer of 958, but declined considerably toward the year-end. With economic activity expanding to record levels in recent months, unemployment this year has declined substantially further but it has remained somewhat above levels prevailing before the onset of recession in 957. Consumer income for the year as a whole was larger than for 957, in part because of larger unemployment and other transfer payments which offset some of the loss in wage and salary income by those affected by unemployment. After allowance for a rise in consumer prices during the year, real income declined from 957 to REPRINTED FEDERAL RESERVE These summary statements relate to overall activities of 57 million consumer units with widely diverse resources and needs and varying ways of adapting their resources to their needs during a period of economic decline and recovery. In any period, whether one of stable, expanding, or contracting economic activity, some individuals fare better than others with respect to their income and employment experience. The recent recession not only increased the number of those with unfavorable experiences, but it affected some groups in the population more seriously than others. The Survey of Consumer Finances contributes to understanding the impact of recession on the incomes, expenditures, assets, and debts of different groups in the economy. The first three sections of this article are concerned with incomes and selected purchases of consumers during 958 and with their asset and debt positions at the time of the most recent Survey, early 959. The final section is concerned with unemployment in 958 its incidence among various groups of consumer units and its conse- This is the second of a series of articles presenting the findings of the 959 Survey of Consumer Finances conducted by the Board of Governors of the Federal Reserve System in cooperation with the Survey Research Center of the University of Michigan. The first article appeared in the Federal Reserve BULLE TIN for March. The present arlicle was prepared by Dorothy Projector of the Consumer Credit and Finances Section of the Board's Division of Research and Statistics. Work at the Survey Research Center was under the supervision of James N. Morgan and ChHrles Lininger. FROM FOR JULY 959 BULLETIN

7 THE FINANCIAL POSITION OF CONSUMERS 70 TYPES OF MONEY INCOME, 958 MIAN AMOUNTS FOR SPENDING UNITS ThoDiondi ol dollar! I- ALL SPENDING UNITS UNITS WITH TWO OR MORE PERSONS SINGLE - PERSON UNITS ^,»ANSEE«MISCELLANEOUS piomir SELF - IMflOYMINt WAGES AND SAlAtlES AOt Of HEAD S5-M NOTE. Calendar-year income before (axes. Property income refers to interest, dividends, royalties, and rem (except for payments by roomers); self-employment income, to income of professional men and artisans, farm income' of farmers, and quences for incomes, expenditures, and financial positions. INCOME According to Department of Commerce estimates, personal income rose $8 billion or 2 per cent from 957 to 958, despite the decline in economic activity that began in the fall of 957 and extended into the spring of 958. This increase was considerably smaller than that of the three preceding years and, after allowance for the 3 per cent rise in the consumer price index, real income declined from 957 to 958. The rise in personal income in current dollars stemmed largely from sizable increases in transfer payments and in farm income. Transfer payments alone expanded $4.4 billion, and larger unemployment compensation benefits accounted for about onehalf of this amount. Farm income was sub- income from unincorporated businesses; miscellaneous income, to payments by roomers and farm income of nonfarmerv For a definition of transfer payments, see note 5, p. 7(2. stantially above the level of the preceding five years. The increase of $2.4 billion from 957 to 958 resulted mainly from higher prices for livestock and increased marketings of crops. Wage and salary disbursements. of commodity producing industries declined $4 billion from 957 to 958, but there were increases totaling $5 billion in the disbursements of the trade and service industries and governments. Distribution and source. According to Survey findings, the pattern of differences among groups as to the amounts and sources of income was similar to that of other recent years in many important respects. As may be seen in the accompanying chart, income of single-person spending units, tends to be smaller than that of spending units with two or more persons. The differential reflects not only differences in the earnings of the head of the unit but also the fact that in 3 A spending unit, as defined in the Survey, consists of all related persons living together who pool their incomes. Husband and wife and children under 8 living at home are always considered to be members of the same spending unit. Other related persons in the household are separate spending units if Ihey earn more than $5 per week and do not pool their incomes.

8 702 FEDERAL RESERVE BULLETIN - JULY 959 multiperson spending units persons other than the head frequently receive income. 3 For example, in nearly one-half of all husband-wife units someone other than the head received income in 958, usually the wife from work outside the home. The amount and sources of income vary markedly with the age of the person heading the spending unit. Spending units in the middle age range years on the average receive the largest incomes. The proportion of income derived from wages and salaries diminishes with age, while income from self-employment and from property assume more importance.* Establishment of a business or acquisition of incomeproducing property usually requires financial reserves, which older spending units have had more opportunity to accumulate than younger units. For spending units in the oldest age group 65 and over transfer payments, including pensions and annuities, are the most important source of income; 3 out of 4 such units receive income in this form. 6 Even for this group, however, wages and salaries constitute a sizable proportion of total income. While average spending unit income was about the same in the two years 957 and 958, some occupational groups experienced increases while others received about the same amount or had declines. 6 The median income declined for the semiskilled group, which experienced a rather sharp increase in unemployment. For self-employed businessmen and for the unskilled group the medians were unchanged, and for all other occupational groups they increased. For farm operators the rise in money income was sharp from $2,350 in 957 to $2,800 in 958. Income change of individual units. Somewhat more than 40 per cent of all spending units reported an increase in income from 957 to 958. As is shown in the chart on page 703, the proportion was about the same as in 949 and 954, years also affected by declines in employment, but it was less than for other postwar years. Conversely, 22 per cent of all spending units reported a decline in income from 957 to 958. While this percentage was larger than in most postwar years, it was well below the peak of 27 per cent reported for 949. * The head of the spending unit, as defined in the Survey, is the husband in husband-wife units. In other units, the head is the person best acquainted with the financial affairs of the spending unit, usually the major earner. * Comparisons with data on types of income prepared by the Office of Business Economics of the Department of Commerce in connection with income size distributions suggest that property income as reported in the Survey is substantially understated. 'The definition of transfer payments used in the Survey differs from that used in the personal income series of the Department of Commerce. Both series cover the following: old-age and survivors insurance benefits; retirement pay for railroad workers, Government civilian employees, and the military; various payments to veterans; unemployment compensation benefits; and relief payments by public agencies. In addition to these items the Survey covers the follow- ing: private pensions and annuities; welfare payments by private agencies; and regular contributions from one consumer unit to another. * Median money income according to the Survey was $4,400 in 958 compared with $4,350 for the preceding year. The corresponding figures for mean money income were $5,50 and $5,60., The estimated number of spending units declined slightly so that aggregate money income as estimated from the Survey-^-mean income multiplied by the number of spending units declined slightly. Differences between the Survey estimate of aggregate money income and the personal income estimate of the Department of Commerce result from sampling variability of the Survey estimate and from conceptual differences. For a summary of the conceptual differences, see the Technical Appendix to "The Financial Position of Consumers," Federal Reserve BULLETIN, September 958, pp

9 THE FINANCIAL POSITION OF CONSUMERS 703 INCOME CHANGE FROM PREVIOUS YEAR PIRCENTAGE DISTRIBUTION OF SPENDING UNITS DECREASE 3* Ol MOKE LITTLE WITHIN * I S i. 54% OR MOIE u CHANGE 94B 9S The favorable income experience of farmers in 958 was reflected in the fact that 54 per cent reported income increases the largest proportion for this group during the entire postwar period. Forty-four per cent of self-employed businessmen reported increases; this was more than in 957, but less than during the years A larger proportion of white collar than of blue collar workers reported income gains in 958, as has been the case for some years. For most spending units changes in income are determined mainly by the income and employment experience of the head of the unit. In reporting reasons for income change, 9 in 0 spending units cited changes in earnings of the head. More pay because of a promotion or a wage increase was mentioned most often as the reason for increased earnings, but more work, either in the form of less unemployment or more overtime, was also mentioned often. On the other hand, the usual reason given for declines in the earnings of the head was time lost through unemployment or shorter hours; change to a lower paying job was cited much less frequently. Only about 2 in 0 spending units mentioned variations in earnings of other members of the spending unit as a reason for income change, and about one in 0 mentioned changes in other types of income, such as property income or transfer payments. Nevertheless, the earning experience of wives and other members of the spending unit was an important factor for certain groups. For example, among younger married couples with no children more than 4 in 0 of those reporting income increases cited larger earnings of the wife among the reasons. Changes in the receipt of property income or transfer payments were frequently mentioned by retired persons. ASSETS According to flow-of-funds estimates to be presented in the BULLETIN for August, net acquisition of financial assets by consumers other than proprietors' investment in their businesses was somewhat larger in 958 than in 957, but total outlay for durable goods was below the high levels of the preceding three years. Financial assets. There were marked shifts in the types of financial assets that consumers acquired in 958 as compared with 957. T The increase in holdings of savings deposits and savings shares in 958 was the largest in the postwar period. ' Holdings of U. S. savings bonds declined, but the reduction was less than in 957. The net purchase of marketable securities bonds and stocks 7 Data cover consumers, personal trusts, anti nonprofit organizations. The latter two groups are included for statistical reasons.

10 704 FEDERAL RESERVE BULLETIN JULY 959 declined markedly compared with the rate for the period , largely as a result of a sizable liquidation of U. S. Government securities. The market value of all securities held rose sharply from the beginning to the end of the year, however, as a result of a rise in stock prices. The large increase in savings deposits and shares, together with a rise in currency and demand deposits, brought liquid assets of consumers to a new peak in early 959 despite the decline in their holdings of U. S. savings bonds. According to Survey findings, the distribution of liquid assets among consumer units in early 959 was little changed from earlier years. 8 About 75 per cent of all spending units reported holding some liquid assets and more than 40 per cent held $500 or more. The proportion of spending units with savings bonds continued to decline, while the proportions with savings accounts or shares and checking accounts were little changed, at 50 per cent and 55 per cent, respectively. While the aggregate amount of liquid assets grew substantially, only 30 per cent of all spending units reported net additions to their liquid assets from early 958 to early 959 and nearly 25 per cent reported declines. 9 This pattern of change is similar to that of the preceding year, when aggregate holdings also rose substantially. The term "liquid assets" is used in the Survey to refer to the total of checking accounts, savings accounts in banks, shares in savings and loan associations and credit unions, and U. S. savings bonds. Data prior to 959 included postal savings, which were held by less than 2 per cent of all spending units early in 958. Questions about currency holdings have been omitted since the early Surveys because of unfavorable experience with accuracy of response. Estimates of aggregate liquid assets provided by the Survey are substantially less than the aggregates contained in the Board's flow-of-funds accounts. The weight of the evidence is that Survey aggregates are understated. For a discussion of this problem see The pattern of liquid asset change did not vary markedly with age. For all age groups the proportion adding to liquid assets exceeded the proportion reducing balances. This was true even among units headed by persons 65 or more years of age, most of whom are retired and living off smaller incomes than they received during their working days. Large additions to assets $500 or more were less common for young consumers than for those in the middle age brackets, probably because most spending units in the younger group have not reached their peak income and their outlays for housing and durable goods are typically high. Tangible assets. Consumer outlays for automobiles declined sharply from 957 to 958 according to Department of Commerce estimates, but expenditures for other durable goods as a group increased somewhat. " Despite the reduction in car purchases in 958, the proportion of spending units reporting car ownership in early 959 was slightly more than 70 per cent, little changed from other recent years. The trend to ownership of more than one car continued. In early 959, 2 per cent of all consumer units owned two or more cars, compared with 0 per cent in early 958. According to Survey findings, 7 per cent of all spending units purchased new cars in 958 and 5 per cent bought used cars. The 40 per cent of consumer units with the Technical Appendix cited in note 6. "At the time of interview in early 959 spending units reported their liquid asset holdings for that date and for a year earlier. Change in liquid assets was computed from the data for holdings. 0 Developments in home purchase and ownership and in mortgage debt will be. presented in a later issue of the BULLETIN. The Survey finding implies an increase from 957 to 958 in used car purchases, which is not in accord with trade data. The difference is probably due to sampling variability of the Survey estimate.

11 THE FINANCIAL POSITION OF CONSUMERS 705 largest incomes accounted for more than 70 per cent of the new cars purchased, a somewhat smaller share than in 957. Consumers in this relative income position have accounted for a large share of new car purchases in all recent years between 70 and 80 per cent. Younger consumers, who as a group generally have smaller incomes and assets, tend to be the heaviest purchasers of used cars. Consumers favored lower priced cars in 958. Trade data, for example, show that sales of 8-cylinder domestic models declined sharply and sales of foreign makes most of which were relatively low priced doubled from 957 to 958. A shift is also indicated by the lower average price paid by Survey respondents for new cars. The average amount received for cars traded in was also smaller. Some part of these declines may be attributable to the legislation effective in the fall of 958 that requires dealers to display factory-recommended prices. Prior to that time dealers often quoted high nominal retail prices on new cars and concurrently offered allowances in excess of market value for the trade-in. More than 4 in 0 consumer units purchased furniture or major household appliances in 958. Both the proportion that purchased and the median expenditure $270 were about the same as in other recent years. PERSONAL DEBT Purchasers of cars and other durable goods continued to use credit extensively in 958. More than 6 in 30 new car buyers and 5 in 0 used car buyers financed their purchases by borrowing. The small volume of automobile purchases during the year, however, resulted in a sharp decline in the aggregate amount of automobile instalment credit extended. Repayments were little changed from 957, and the amount of automobile instalment credit outstanding, as estimated from lender data, declined from the end of 957 to the end of 958. Increases in other types of credit more than offset the decline in automobile instalment paper so that the total of short- and intermediate-term credit oustanding rose slightly over the year. The distribution of personal debt in early 959 was similar to that in other recent years. About 60 per cent of all spending units reported such debt and nearly 30 per cent debts of $500 or more. Personal debt is most common among younger consumers, a group that includes heavy purchasers of durable goods. About 80 per cent of all spending units headed by persons years of age reported personal debt in early 959 compared with 25 per cent of those headed by persons 65 years of age or older. UNEMPLOYMENT For about two years prior to the onset of the recession, the number of unemployed persons had been relatively stable at almost 3 million, or about 4.2 per cent of the civilian labor force, according to monthly Bureau of the Census data after seasonal adjustment. By April of 958, the recession low point for general economic activity, the number^of unemployed had reached 5 million or 7.5 per cent of the labor force. In the autumn of 958 the unemployment rate began to decline and by June of 959 was down to 4.9 per cent. The increase in unemployment during the recession was concentrated among production workers in durable goods manufacturing industries and related activities. The Surveys of Consumer Finances conducted early in 958 and 959 provide some

12 706 FEDERAL RESERVE BULLETIN JULY 959 information on the employment experience during the previous year of the heads of the spending units interviewed. Thus it is possible to distinguish spending units in which the major earner experienced unemployment at some time during the year and to describe broadly the kinds of units that were so affected. Survey data on the composition of income and on change in income from the previous year give some impression of the effects of the head's unemployment on the income of the spending unit. Data on liquid asset holdings at the beginning and the end of the year suggest possible effects on asset holdings. Information is also presented on purchases of durable goods and debt positions of units experiencing unemployment. Incidence among spending units. The accompanying table summarizes Survey data on the employment status of all spending units and on the number of weeks worked for employee spending units those headed by persons in the labor force at the time of the Survey other than the self-employed. 2 According to findings of the 959 Survey, there were more than 7.5 million spending units in which the head worked less than All groupings of spending units by employment status and experience relate to the circumstances of the head of the unit. Information was not collected on the status and experience of other members of the unit. Spending unit heads who worked weeks, including paid vacations and paid sick leave, were considered as having "full-year" employment. Those who worked less than 50 weeks for economic (jobconnected) reasons primarily inability to find jobs and temporary layoffs were classified as having been unemployed. Also grouped with the unemployed were those who worked less than 50 weeks because of the seasonal nature of their occupation or because they were out on strike; the total for these two groups is estimated from Survey results at 800,000 for 958. Not included with the unemployed group as defined in this article were an estimated 4 million heads of spending units who worked less than 50 weeks for personal reasons for example, illness, school attendance, leave of absence from work without pay. About EMPLOYMENT STATUS AND EXPERIENCE 958 AND i957 (Percentage distribution) Status of head of unit, and employment experience Self-employed or not in labor force Employee spending units 69 7 Employee spending units total Employed full year Employed less than full year: Job-connected reasons total weeks weeks weeks or less weeks weeks weeks or less 4 3 NOTE. For explanation of termi used in this table, see Supplementary Table 20, notes I and 3. Details may not add lo totals because of rounding. the entire year 958 for economic reasons primarily inability to find jobs or temporary layoffs. Such units represented 20 per cent of the estimated total of 39 million employee spending units. Comparable data from the 958 Survey indicate that the heads of 6 million employee spending units, or about 5 per cent of the total, worked less than a full year for economic reasons during The number of spending unit heads 4 per cent of those classified as unemployed mentioned personal as well as job-connected reasons in accounting for employment of less than the full year. For this group employment for, say, 26 weeks did not necessarily imply unemployment for the remaining 26 weeks; the individual may have been in school, or otherwise not in the labor force, for part of 958. "Survey findings on work experience in 957 and 958 are in general agreement with those of the Bureau of the Census pertaining to the annual work experience of individuals in the population. Precise comparisons, however, are not possible because of differences in definitions and classification procedures in the two inquiries. Census data for 957 are published in "Work Experience of the Population in 957," Current Population Reports, Labor Force, Series P-50, No. 86, U. S. Bureau of the Census, September 958, Table 5. Comparisons for 958 were made with data that have not as yet been published.

13 THE FINANCIAL POSITION OF CONSUMERS 707 who worked 26 weeks or less was considerably larger in 958 than in 957. The characteristics of spending unit heads who experienced some unemployment in the two years were similar in a number of respects. In both years a relatively large proportion of unskilled and semiskilled workers, nonwhite persons, and those with little formal education worked less than a full year for job-connected reasons (Supplementary Table 20). M Unemployment was also relatively high in both years among spending unit heads who were very young, many of whom were inexperienced workers just entering the labor force. Despite these general similarities in the incidence of unemployment in the two years, unemployment during 958 affected a erouo which had more skill, was older, and was better educated than the group that was unemployed in 957. Among occupational groups, for example, the increase in unemployment was greatest for semiskilled workers; this reflected the high proportion of these workers in durable goods and other industries hardest hit by the recession. As a result, semiskilled workers represented a larger proportion of those who worked less than a full year in 958 than in 957 (Supplementary Table 2). The increase from 957 to 958 in unemployment of spending unit heads also bore more heavily on certain age and educational groups. In both years those under 25 were most often affected, but the largest increase occurred in the middle age ranges and With respect to education, the most marked rise occurred among those at intermediate levels of educational attainment. " These factors are of course highly interrelated; the same unemployed individual would often fall in two, or all three, of the groups mentioned. These differences throw some light on the distribution of unemployment among employee spending units associated with a recession as contrasted with that during a more normal period. Data for the calendar years 957 and 958 cannot be interpreted as precisely indicating such differences because a part of each year was affected by recession but they are suggestive because the main brunt of the recession, at least with respect to unemployment, was borne in 958. Effects on income. Unemployment has various consequences for the individual and his family, the most immediate,of which is loss of income. As the lower panel of the chart at the top of page 708 indicates, declines in income from 957 were reported often by spending units whose heads experienced unemployment during 958. Among those in which the head worked weeks, 40 per cent reported that their income was less in 958 than it had been in 957. The proportions reporting declines rose to 50 per cent for those who worked weeks and to 70 per cent for those who worked 26 weeks or less. In contrast, only 2 per cent of those employed for the full year reported a decline. Unemployment compensation benefits and other transfer payments were an important source of income for spending units that were affected by unemployment. As may be seen in the top panel of the chart, the average amount of transfer payments showed a sharp rise as the number of weeks of employment declined. About 60 per cent of those with less than 40 weeks of employment reported receiving transfer payments, in contrast with 40 per cent of those working weeks, and 2 per cent of those working the full year. The group that experienced some unem-

14 708 FEDERAL RESERVE BULLETIN - JULY 959 MONEY INCOME OF EMPLOYEE SPENDING UNITS, 958 TYMS - ME ANS, THOUSANDS or DOLLARS TRANSFER OTHER EARNINGS or WIFE HEAD CHANOI riom PRICIDINO YIAB PERCENTAGE Of All SPENDING UNITS IH CROUP DECREASE ISKOR MORE LITTLE CHANGE On WITHIN INCRIASE 4 * m J l * OR MOKE 30 -» * 7.4 It OR LESS SO smaller amounts of liquid assets than fully employed units. The difference was especially marked between those with less than 40 weeks of employment and those with longer periods as may be seen in the accompanying chart. Liquidation of assets during 958 accounts in part for the less favorable asset position of the unemployed early in 959. Almost one-half of the spending units that experienced some unemployment during 958 and that had liquid assets at the beginning of 958 drew down their balances over the year. This compares with about onethird for the fully employed units. A more important factor in comparing the asset ownership of the two groups, however, was that the holdings of those unemployed during part of 958 had been much smaller early in the year than those of fully employed units. LIQUID ASSETS OF EMPLOYEE SPENDING UNITS EMPLOYMENT Or HEAD IH *3 - WEEKS NOTI!. Calendar-year income before uxes. Earnings refer to wages and salaries and to self-employment income of professional men and artisans. Other income, to Interest, dividends, royalties, rent, income -from unincorporated businesses, farm income of nonfarmers, and payments by roomers. For a definition of transfer payments, see note 5, p For definition of employment of head, sec note to chart in next co'umn. ployment differed little from the fully employed in the extent to which wives supplemented the earnings of the head of the unit. Among husband-wife units in which the head was affected by unemployment for part of 958, the wife was employed either full or part time in almost one-half the cases and her earnings averaged about $,600 (mean). The proportion of wives who worked was slightly less for spending units in which the head worked the full year, but the average amount earned by wives was larger $,900. Effect on liquid assets. Spending units experiencing unemployment in 958 held MIAN HOLDINGS HUNDREDS OF DOLLARS EARLY EARLY *3 ED! SPENDING UNITS WITH HOLDINGS PERCENTAGE OF ALL SPENDING UNITS IN GROUP 30 - SI * OR LISJ EMPIOTMEWI Or HEAD IH VSR - WEEKS NOTE. Employment of head refers to full-year (50-52 weeks) or less-than-full-year for job-connected reasons. For definition of job-connected reasons and of employee ipcnding units, sec notes to Supplementary Table 20. Data for liquid asset holdings for both years were reported at time of interview early tn

15 THE FINANCIAL POSITION OF CONSUMERS 709 Some of the difference in liquid asset ownership early in 958 might have been expected because unemployment affects certain groups more than others and the groups affected tend to have smaller asset holdings. Part of the explanation also may be that those who experienced unemployment in 95 8 had experienced unemployment in earlier years to a greater degree than those who were fully employed during 958. Durable goods and debt. Tn view of their smaller incomes and their limited asset holdings, it is not surprising that spending units with unemployment experience spent less on the average for cars and household durable goods in 958 than the fully employed. Among those with less than 40 weeks of employment, for example, about half purchased a new or used car or some household durable good and these purchasers spent about $475 on the average. Among the fully employed more than three-fifths made such purchases, with an average expenditure of $800. Although spending units with unemployment purchased less frequently and spent less than employed units, their aggregate expenditures for these purposes represented about the same proportion of their aggregate income 8 per cent as for the fully employed. More than 7 in 0 of the spending units affected by unemployment in 958 owed some personal debt early in 959. This was about the same proportion as for the fully employed. The amounts owed by debtors who were fully employed, however, was almost $900, compared with about $750 for units with weeks of employment and $650 for those with less than 40 weeks. The smaller average indebtedness of spending units in which the head was employed less than 40 weeks was attributable to smaller amounts owed on cars and durable goods. Other short- and intermediate-term indebtedness was about the same on the average for the various groups. While personal debt was smaller on the average for those unemployed for part of 958 than for the fully employed, it was larger in relation lo their incomes and liquid assets. For example, among debtor spendr ing units with less than 40 weeks of employment, less than 40 per cent owned any liquid assets. ' In contrast almost 80 per cent of the fully employed debtors reported some assets. TECHNICAL NOTE Results of the 959 Survey of Consumer Finances arc based on 3.00 interviews during January and February in 2,790 dwelling units. These dwelling units are located in the 2 largest metropolitan areas and in 54 additional sampling areas chosen to represent a cross section of the population living in private households in the continental United States. Transients, residents of institutions, and persons living on military reservations are not represented. Within dwellings, interviews are conducted with each spending unit. A spending unit is defined as all persons living in the same dwelling, and related by blood, marriage, or adoption, who pool their incomes to meet their major expenses. A husband and wife living together are always included in the same spending unit even though they do not pool their separate incomes. All children under 8 years of age are included in the spending unit of their closest relative.

16 70 FEDERAL RESERVE BULLETIN * JULY 959 The spending unit containing the owner or lessee of ( the dwelling is the primary spending unit. Children 8 or more years of age and other relatives who earn more than $ 5 per week and who do not pool their incomes with that of the primary spending unit are classified as related secondary spending units. Spending units composed of persons in the dwelling unit who are not related to members of the primary unit are designated as unrelated secondary spending units. Since the spending unit includes those persons, and only those persons, who make joint financial decisions, it is the unit most frequently used in tabulations of Survey financial data. Some Survey data, however, notably those on housing, are presented for family units. A family unit is defined as all persons living in the same dwelling who are related by blood, marriage, or adoption. Survey family units include individuals living alone as well as groups of related persons. To obtain data on a family basis, information for related secondary spending units is combined with that for the primary spending units to which they are related and with which they live. The head of the primary spending unit is considered to be the head of the family. The number of family units equals primary spending units plus unrelated secondary spending units. Estimates of the total number of spending units in the population covered by the Survey are derived by multiplying the number of occupied dwelling units, or households, estimated from Census data, by the average number of spending units per dwelling unit included in the Survey sample. The number of family units is estimated in a similar manner. Both the estimated number of dwelling units and the average number of spending units and family units per dwelling unit are subject to sampling error. TABLE SPENDING UNITS AND FAMILY UNITS IN Type of unit SURVEY POPULATION [Estimated numbers in millions) Year of Survey Spending units total' a) Primory (equals occupied dwellb) Relaxed secondary J c) Unrelated second - Family units (a+c I.S Estimates or the number of spending units, which depend upon the ratio of primary spending units to all spending units, are subject to sampling error. The size of the sampling error is such that there is one chance in 20 that the estimates shown in the table are abo\e or below the true figure by million. Table shows the estimated number of dwelling units, spending units, and family units in the Survey population. Aggregate data are obtained for the population covered by the Survey of Consumer Finances by multiplying data on proportions and means obtained in the Survey by the estimated total number of spending units or family units. Estimates of the number of units with given characteristics are obtained by multiplying the proportion shown by the sample to have that characteristic by the estimated total number of units. Estimates of aggregate assets, debt, expenditures, and TABLE 2 APPROXIMATE SAMPLING ERRORS OF SURVEY FINDINGS The chances arc 95 in 00 that I he value being estimated lies within a range equal to the reported percentage plus or minus the number of percentage points shown below. Reported percentage Nu mber of interviews 3,000, or or It 0 or or I Approximate size of sample,

17 THE FINANCIAL POSITION OF CONSUMERS 7 other variables are obtained by multiplying the mean amount derived from the sample by the number of units. Survey findings are based on information for a sample of spending units and are therefore subject to error arising from sampling variability. The range of error from this TABLE 3 SAMPLING ERRORS OF DIFFERENCES Difference! required for significance (95 per cent probability) in comparisons of percentages derived from successive Surveys of Consumer Finances and from two different subgroups of the same Survey. Size of sample or group Size of sample or group J For percentages from about 35 per cent to 65 per cent II For percentages around 20 per cent and SO per cent For percentages around TO per cent and 90 per cent " i " For percentages around 5 per cent and 95 per cent I ooo The sampling error does not measure the actual error that is involved in specific Survey measurements. It shows that except for nonsampling errors, errors in reporting. In interpretation, etc. differences larger than those found in the table will arise by chance in only 5 cases in Approximate size of annual Survey sample, A discussion of the factors affecting sampling errors in the Survey of Consumer Finances is available on request from the Division of Research and Statistics, Board of Governors of the Federal Reserve System, Washington 25. D. C. source can be computed. Sampling errors for percentages based on Survey information have been computed for specific statistics from the 953 and 954 Surveys of Consumer Finances and are presented in Tables 2 and 3. In order to determine the approximate sampling error for a Survey finding from these tables, it is necessary to know the number of interviews on which particular percentages are based. These numbers are shown in Tables 4 and 5. Prior to the 959 Survey spending units at higher economic levels were sampled at TABLE 4 SAMPLE SIZE FOR SPECIFIED GROUPS OF EMPLOYEE SPENDING UNITS, 959 SURVEY All employee spending units (Number of spending units] Group characteristic Employment experience of head: Employed full year (50-52 weeks) Employed less than full year for job-connected reasons: weeks weeks 26 weeks or lets Employed tess than full year for personal reasons.. Not ascertained Occupation when working: Professional and sem[professional Managerial Clerical and sales Skilled Semiskilled Unskilled and service Other Not ascertained Spending unit tize and age of head: Single person: and over Two persons or more: and over Not ascertained Education ol head: Grade school Some high school High school graduate Some college College graduate Not ascertained Race of head: White Nonwhite Not ascertained Number 2,45, II For explanation of terms used in this table, sec 5upplem:ntary Table 20.

18 72 FEDERAL RESERVE BULLETIN - JULY 959 TABLE 5 SAMPLE SIZE FOR SPECIFIED GROUPS, 959 SURVEY [Number of spending units] Group characteristic Number Group characteristic Total Income: UnderSl.OOO S,000-S,999 $ ,999 S3.00O-S3.999 S4,000-S4,999 S5.000-J5.999 S6.000-S7.499 S7.500-S9.999 SI0,000 and over Occupation of head: Professional and semiprofessional Managerial Self-employed businessman Clerical and soles Skilled Semiskilled Unskilled and service Farm operator Retired Other J Not ascertained Marital status: 4 Single: Age IS^M Age 43 or over Married: Age 8-44, no children under 8 Age 8-44, children under 8 Age 45 or over, no children under 8 Age 45 or over, children under IS... Other Not ascertained 3, B Age of head: and over Not ascertained. Region: 5 North East North Central..'. South West Purchasers of selected goods: New cars Used cars Furniture Television sets Washing machines Refrigerators Siic of spending unit and age of head: Single person: and over Two persons or more: and over ; Not ascertained r~ i Money income before taxes for calendar year 958. Income was estimated for about 2 per cent of the cases shown on the basis of other information reported in the interview. * Occupational status as of dale of interview early in 959. J Spending units headed,by protective service workers, students, housewives, and persons not employed at time of interview. * Single spending units include unmarried, widowed, separated, and divorced persons without children. "Other" includes spending units with various combinations of adults and children not classified as either single or married. Age refers to head of spending unit. i As defined by U. S. Bureau of the Census. higher rates than those at lower levels, and weights were introduced to maintain the representativeness of the results. 2 For the * For a further discussion, see "Methods of the Survev of Consumer Finance!," Federal Reserve BULLtrrtN, July 950, pp Survey spending units at different economic levels were sampled at the same rate. In all years adjustments were introduced to take account of the fact that the response rate is greater among certain types of spending units than others.

19 THE FINANCIAL POSITION OF CONSUMERS 73 SUPPLEMENTARY TABLE INCOME DISTRIBUTION OF SPENDING UNITS AND OF TOTAL MONEY INCOME BEFORE TAXES [Per cent] Money income before taxe* Spending units Total money income Under SI, $3, , II S S ,250 S3 960 S3 50 J5.60 S5.40 4,650 Income data for each year are based on interviews early in the > Median income is that of the middle spending unit in a ranking following year. or all units by size of money income before taxes. A spending unit includes all persons living in the same dwelling 4 Mean income is obtained by dividing aggregate money income and related by blood, marriage, or adoption, who pool their incomes before taxes by number of spending units, io meet major expenses. Single-person spending units are included. NOTE. Details may not add to totals because of rounding. SUPPLEMENTARY TABLE 2 INCOME OF SPENDING UNITS WITHIN SPECIFIED GROUPS, 958 [Percentage distribution of -pending units) Group characteristic All income groups Under ,000-5, S money income before taxes $3,999 $4,000-54,999 55,000- $5, ,499 S $9,999 SI 0,000 and over Age of head of spending unit: Occupation of head of spending unit: Professional and semiprofessional () I Self-employed businessman Marital status:' Single: IS Married, both adults present: Age 8-44, no children under ' Age 45 and over, no children under Other IB Region:« II II II West Occupational status as of date of interview early in 959. i No cases reported or less than one-half of per cent. J Single spending units include unmarried, widowed, sop arm led. and divorced persons without children. "Other" includes spending units with various combinations of adults and children not classified as either single or married. Age refer* to head of spending unit. * As defined by U. S. Bureau of the Census, NorE.-Delails may not add to totals because of rounding.

20 74 FEDERAL RESERVE BULLETIN JULY 959 SUPPLEMENTARY TABLE 3 MEDIAN INCOME FOR ACE AND OCCUPATIONAL GROUPS [In dollars] Croup characieristic b Group characters tic Age of head of spending unit: and over 2,950 5, ,00,840 2,70 5, , Occupation of head of spending unit Professional and semiprofessional. Managerial Self-employed businessman Clerical and sales Skilled Semiskilled Unskilled and service Farm operator Retired 7,450 7, , ,000 7,520 6,380 4,70 5,800 4,800 2,850 2,350, '4,60 5,350 4,400 3, ,350 6, ,300 4,660 ' (>) ' Revised. Money income before taxes for spending units. Data Tor each vear are based on intervie*s early in the following year. Occupational status for each year as of date of interview early in the following year. 3 Not available. SUPPLEMENTARY TABLE 4 DISTRIBUTION OF TOTAL MONEY INCOME BEFORE TAXES, BY INCOME TENTHS Income tenth Percentage of total money income Mean income within tenih Lowest income within tenth <*> (=) P) 0) ,50, , , ,360 2,300 2,30 2,070,970,890,900, ,80 3,80 3,30 2,830 2, , Fifth ,950 3, , , ,80 4,760 4, ,350 4,270 3,960 lt 0 It 5,680 5, , ,640 Eighth ,800 6,570 6, , , ,390 8, ,90 7,000 6, Income data for each year are based on interviews early in the following year. Tenths were obtained by ranking spending units according to money income before taxes. Data not available. NOTF. Details may not jdd to totals because of rounding. SUPPLEMENTARY TABLE 5 RECIPIENTS OF SELECTED TYPES OF INCOME WITHIN INCOME QUINTILES. 958 [Percentage of spending units] Income quintile' Wages and salaries Selfemployment income* Business income J Farm income 4 Interest and dividends * Rent* Transfer payments' II i Quintiles were obtained by ranking spending uniu according lo money income before taxes. * Income of professional men and artisans; excludes business income. ' Income from unincorporated businesses. Excludes farm income of nonformcr.. -, Interest, dividends, and royalties. * Excludes payments by roomers. i Pensions, annuities, social security and veterans' benefits, unemployment compensation benefi is, welfare payments, alimony, and regular contributions from one consumer unit to another.

21 THE FINANCIAL POSITION OF CONSUMERS 75 SUPPLEMENTARY TABLE 6 LIQUID ASSET HOLDINGS [Percentage distribution of spending units] Amount ) II $2,000 $4, [ i Liquid assets, according to the Survey definition, are U. S. savings bonds, checking accounts, savings accounts in banks, and shares in savings and loan associations and credit unions; currency is excluded. Data prior to 959 include postal savings accounts, which were held by less than 2 per cent of all spending units early in 958. Data prior to 957 also include marketable U. S. Government bonds, which were held by about per cent of all spending units early in 957. Data are as of dote of interview early in Survey year. NOTE. Details may not add to totals because of rounding. SUPPLEMENTARY TABLE 7 LIQUID ASSETS WITHIN INCOME GROUPS, EARLY 959 [Percentage distribution of spending units] Type and size of holding 958 money income before taxes All spending units Under $,000- $2,000-53,000-54,000-55,000- $6,000- $7,500- $0,000 5,000 $,999 $2,999 $3,999 54,999 $5,999 $7,499 $9,999 and over Total liquid assets: $ S500-S $,000-$, $2,000-$4, $ , ,000 and over All cases U. S. savings bonds: I I S50O-S $,000-5,999 4 CI I ,000 and over LOO Savings accounts: $ SS00-S $,000-5, $2,000 and over Checking accounts: S200-$ S500-S999...' $,000-$, ,000 and over i No cues reported or less than one-half of per cent, a Consists of savings accounts in banks and shares in savings and loan associations and credit unions. NOTE. Details may not add to totals because of rounding.

22 76 FEDERAL RESERVE BULLETIN JULY 959 SUPPLEMENTARY TABLE 8 CHANGES IN HOLDINGS OF LIQUID ASSETS' [Percentage distribution of spending units within specified groups] Croup characteristic All cases $500 and over Increase Decrease Little change 2 $ and ovtr No holdings} All spending units Income quintile: Lowest Second Third Fourth Highest Age of head of spending unit: and over Occupation of head of spending unit:' Professional and scmiprofcssional... Managerial Self-employed businessman Clerical and sales Skilled Semiskilled Unskilled Farm operator Retired Change in income: 3 Increase: 25 per cent and over 5-24 per cent Little change Decrease: 5-24 per cent 25 per cent and over IS II IS II i Data for 958 based on holdings as of interview date and a year earlier as reported early in 959; data for 957 based on holdings as of interview date and a year earlier as reported early in 958. For definition of liquid assets, see Supplementary Table 6, note. * No change in holdings or change of $25 or less. J Zero holdings as of interview date and a year earlier, as reported early in 959 and early in 958. * Occupational status in each year as of date of interview early in following year. * Change from previous year in money income before taxes. Little change includes change of less than 5 per cent as well as no change. NOTE. Details may not add to totals because of rounding.

23 THE FINANCIAL POSITION OF CONSUMERS 77 SUPPLEMENTARY TABLE 9 AUTOMOBILE OWNERSHIP WITHIN SPECIFIED GROUPS, EARLY 959 [Percentage distribution of spending units] Group characteristic All cases I automobile Owns: 2 or more Does not own SUPPLEMENTARY TABLE 0 ACE OF AUTOMOBILES OWNED BY CONSUMERS [Percentage distribution of automobiles] Age years or less year or less years All spending units io 4 years money income before taxes: Under $,000 $,000-$!,999 $2,0O0-$2.999 $3,0O0-S3,999 $4,00Q-S4.999 $3,00O-$5,999 $6.000-$7,499 S7,500-$9,999 $0,000 and over Sire of spending unit and age of head: Single person: and over. Two persons or more: and over I I (') (') II years I I ( ' Ownership as of date of interview early in each year. In early 959 automobiles were classified for age as follows (in terms of model years): year or less, 939 and 958; 2 years, 957; 3 years, 956; 4 years, 955; 5 to 7 years, 954, 953, and 952; and more than 7 years, 95 and earlier. Similar classifications were used in previous Surveys. NOTE. Details may not add to totals because of rounding No cases reported or less than one-half of per cent. NOTE. Details may not add to totals because of rounding. SUPPLEMENTARY TABLE FREQUENCY OF MAJOR EXPENDITURES FOR DURABLE GOODS WITHIN INCOME AND AGE GROUPS [Purchasers as a percentage of spending units within specified groups] Income or age group Any major expenditure New automobile Used automobil e Income quintile: <*) Third Age of head of spending unit: II II to and over ' A major expenditure is defined as a net outlay (price less trade-in) of $00 or more for automobiles, furniture, and major household appliances combined. * No cases reported or less than one-half of per cent,

24 78 FEDERAL RESERVE BULLETIN JULY 959 SUPPLEMENTARY TABLE 2 AUTOMOBILE PURCHASES WITHIN INCOME AND OCCUPATIONAL GROUPS {Purchasers as a percentage of spending units) Group characteristic New automobile Used automobile Group characteristic New automobile Used automobile All spending units Money income be To re taxes: Under SI,000 SI.000-S.999 S2.000-S2.999 S3.OO0-S3.999 S4.000-S O0O-S5.999 $6, $7,500-59,999 SI0,000 and over (Occupation of head of spending unit: Professional and semi professional Managerial Self-employed businessman... Clerical and sales Skilled Semiskilled Unskilled and service Farm operator Retired I I I Occupational status for each year as of date of interview early in the following year. SUPPLEMENTARY TABLE 3 PRICE PAID AND NET OUTLAY BY AUTOMOBILE PURCHASERS (Percentage distribution of purchasers] Type of purchase and amount Price paid Net outlay New automobile: 2 <>) (->> S2,000-$2, $ , $3.000-$3, tt $3,50O-$ \ 20 J * J T 3 3 I too ,000 $3,050 53, S2.00 $2,060 52, $3, ,20 $2,0 52,00 5,900 Used automobile: Under $ $ IS , II Not ascertained IO S6O0 S850 S S670 S4S0 S In cases of multiple purchases, information is tabulated for the > No cases reported or less than one-half of I per cent, highest priced purchase only.. NOTV. Details may not adil to totals because of rounding, i After deduction for trade-in or sale of automobile.

25 THE FINANCIAL POSITION OF CONSUMERS 79 SUPPLEMENTARY TABLE 4 PURCHASERS OF FURNITURE AND MAJOR HOUSEHOLD APPLIANCES WITHIN INCOME AND MARITAL STATUS GROUPS [Purchasers as a percent age of spending units] Group characteristic Any type of purchase' Furniture Television set Washing machine Refrigerator Money income before taxes: IS A S II B 6 Marital status: Single: Age 8^* Married:' Age 8-44, no children under ( Age 45 and over, no children under IS $270 $270 (') $230 $200 $ S245 Includes purchasers of items listed individually and of other ) Expenditure for both new and used items, before deduction for major household appliances. trade-in. 'Age refers to head of spending unit. Includes only spending «Not available separately, units in which both husband and wife are present. SUPPLEMENTARY TABLE 5 CREDIT PURCHASES OF AUTOMOBILES AND OTHER DURABLE GOODS WITHIN INCOME QUINTILES [Credit purchasers as percentage of all purchasers] Type of purchase and income quintile Type of purchase and income quintile Automobile all incomes ' Highest New automobile all incomesi Highest Used automobile all incomes 2. Second Third Fourth Highest Furniture or major household appliances all incomes^. Lowest Second Third Fourth Highest ' Revised. > Too Tew cases to compute percentage in lowest, second, and ihird quintiles. Too few cases to compute percentage in lowest quintile. 3 Purchasers or two iiems, one for credit and one for cash, are classified as credit purchasers. Charge-account purchasers are classified as cash purchasers.

26 720 FEDERAL RESERVE BULLETIN JULY 959 SUPPLEMENTARY TABLE 6 TYPES OF DEBT WITHIN AGE GROUPS, EARLY 959 [Percentage distribution of spending units] Personal debt only' Mortgage debt and: Age of head of spending unit All cases No debt Some debt Mortgage debt, only Instalment Non instalment Instalment and non instalment. Instalment debt Non instalment debt Instalment and nonmitalmcnt ' (*> 36 If 5 (») ' a ( ( 2 ) 2 > For definition nf personal debt see Supplementary Table 7, No cases reported or (eat than one-half of I per cent, note I. NOTE. Details may not add to totals because of rounding. SUPPLEMENTARY TABLE 7 PERSONAL DEBT [Percentage distribution of spending units] Amount JI-S \ 5 5 $00 $ / IS > Includes all short- and intermediate-term consumer debt other are as of date of interview early in each year, than charge accounts; excludes mortgage and business debt. Data NOTE. Details may not add to totals because of rounding.

27 THE FINANCIAL POSITION OF CONSUMERS 72 SUPPLEMENTARY TABLE 8 PERSONAL DEBT WITHIN INCOME AND AGE GROUPS, EARLY 959 [Percentage distribution ol"spending units] Amount of personal debt Income or age group All No Some cases debt debt SI00- S200- $500-5, SI99 S499 $999 and over money income before taxes: Under SI, $2, $3,000-53, $4,000-54, ,500 $ II Age of head of spending unit: M > For definition of personal debt, sec Supplementary Table 7, NOTE. Details may not add to totals because of rounding, note I. SUPPLEMENTARY TABLE 9 PERSONAL DEBT-LIQUID ASSET RELATION WITHIN INCOME GROUPS, EARLY 959 [Percentage distribution of spending units] Rein lion All spending units Under SI ,000-5, money income before totes 53,000- $3,999 54, ,000- $5,999 56,000- $7,499 $7,500- $9,999 $0,000 and over I Debt as a percentage of liquid assets: Under (*> (>) ) I and over Personal debt and liquid assets as of time of interview; income Supplementary Table 6, note I. 2 before taxes in preceding year. For definition of personal debt, see No coses reported or less than one-half of I per cent. Supplementary Table 7, note I: for definition of liquid assets, sec NOTE. Details may not add lo totals because of rounding,

28 722 FEDERAL RESERVE BULLETIN JULY 959 SUPPLEMENTARY TABLE 20 EMPLOYMENT EXPERIENCE IN 958 AND 957' [Percentage distribution of employee spending units within specified groups! Group characteristic All (30-52 cases 2 weeks) Head employed less than full year Head employed For job-conncclcd reason*- For personal reasons- full year Total weeks weeks weeks weeks or less i <Jiai weeks or less I95S Alt employee spending unit) Occupation when working:* Professional and semiprofess ion a I. Managerial Clerical and sales Skilled Semiskilled Unskilled and service Spending unit size and age of head:* Single person: Two persons or more: Education of head ol'spending unit: Grade school' Some high school High school graduate Some college College graduate Race of head of spending While Nonwhite unit; ! P) (') <*) (') I ' IS ( ( ( i so 85 II II -i <n < "> ( J ) I IS M Refers to experience of head of spending unit during calendar year preceding the Surveys curly in 959 and early in 958. Spending units headed by persons in the labor force at time of interview, other than the self-employed, are classified as employee spending uniis. 2 Excludes cases for which length of employment wot not ascertained. Job-connected reasons were defined as follows: inability to find work, seasonal nature of work, strike, and temporary layoff: personal reasons, as illness or disability, school attendance, leave of absence or vacation without pay, staying home to keep house, or similar reasons. 4 Spending unit heads that were not employed at time of interview were classified according to their occupation when working. No cases reported or less than one-half of I per cent. * Too few cases in groups age 65 and over to compute percentages. ' Includes spending unit heads that had no schooling (less than 2 per cent of all employee units in each year) as well as those that attended grade school. NOTE. Details may not add to totals because of rounding.

29 THE FINANCIAL POSITION OF CONSUMERS 723 SUPPLEMENTARY TABLE 2 CHARACTERISTICS OF EMPLOYEE SPENDING UNITS WITHIN SPECIFIED EMPLOYMENT EXPERIENCE GROUPS {Percentage distribution] Croup characteristic. Head employed full year (50-52 weeks) Head employed less than full year for job-connected reasons weeks weeks 26 weeks or less Occupation when working; I ) (') (') 20 IS Semiskilled (') (') (') (') (') 2 (') (') <») 2 (') * (') (') Spending unit size and age of head: Single person: I -I I (') I 6 Two persons or more: ' II and over....' 2 2 (') 3 6 I too Education of head of spending unit: High school graduate (') I Not ascertained. I I ( > (') All cases Race of head of spending unit: White ' 9 9 (') All cases (") 8 9 ( ) < l ) (') i No cases reported or less than one-half of I per cent. NOTE. For explanation of terms used in this table, see notes to Supplementary Table 20. Details may not add to totals because of rounding.

30 959 Survey of Consumer Finances Housing of Nonfarm Families ONE IN FIVE nonfarm families moved in 958. Almost 7 million families moved into rental properties and about 2.5 million bought new or existing houses. Consumer purchases of new houses totaled 900,000, about the same number as in 957 but appreciably fewer than in other recent years. According to data from the Survey of Consumer Finances, the proportion of nonfarm families owning their homes rose to 6 in 0 early this year, the largest proportion on record. The value of residential properties continued to advance last year, reflecting both additions to the housing stock and rising real estate prices. In January of this year the market value of the 29 million owneroccupied houses was estimated at $372 billion, compared with $83 billion for 20 million houses in early 949. Both the proportion of homes mortgaged and the average ratio of mortgage debt to house value have continued to rise. At the beginning of this year more than one-half of all home-owning families owed mortgage debt totaling an estimated $06 billion. The burden of monthly payments has changed little in the past decade, since growth in income has kept pace with repayment schedules. Developments in housing demand and related developments in home ownership, house value, and mortgage debt in recent years have reflected changes in income and the rate of family formation as well as the condition of the housing stock and the availability of credit. The Survey of Consumer Finances provides some data on the characteristics of recent house buyers, of home owners generally, and of housing status over most of the postwar period. ACTIVITY IN HOUSING MARKETS Elements of change in the demand for housing in recent years can be observed from the housing market activity shown by data from the Survey of Consumer Finances. Change of residence. More than 9 million nonfarm families changed their places of residence last year. As of early 959 This is the third and final article presenting the findings of the 959 Survey of Consumer Finances conducted by the Board of Governors of the Federal Reserve System in cooperation with the Survey Research Center of the University of Michigan. The first article appeared in the Federal Reserve BULLETIN for March, and an analysis of the financial position of consumers appeared in the July BULLETIN. The present article was prepared by Theodore G. Flechsig of the Consumer Credit and Finances Section of the Board's Division of Research and Statistics. Work at the Survey Research Center was under the supervision ot James N. Morgan and Charles Lininger. 'A family, as defined by the Survey, includes all persons living in the same dwelling who are related by blood, marriage, or adoption. A family may consist of a single individual living alone 'or with unrelated persons. A family may include a single spending unit or several separate ones. (See Note 8, p. 0.) In order to obtain a more uniform group for the analysis of such questions as house value and mortgage debt, families deriving the major part of their income from farm operations have been excluded from the current discussion. Other groups excluded from the discussion because they are not covered by the Survey of Consumer Finances are transients and residents of institutions and military bases. 097 REPRINTED FROM FEDERAL RESERVE BULLETIN FOR SEPTEMBER 959

31 098 FEDERAL RESERVE BULLETIN - SEPTEMBER 959 HOUSING STATUS, EARLY 959 Paiceriiaa* dulribuiion ol nonlarm (amii t in group OTHER RENTS' MOVED HFO«f \9it MOVED ivs* - si OWNS' PURCHASIO HOUIE *S* 3 PUHHASED BEFORE I9S6 H 20 ALL FAMILIES -4 IS - * JJ-44 4S-S4 hi-h AGE OF HEAD t l AND OVER LOWtSI Inrt 3rd 4 h HIGHEST INCOME QUINTILE NOTE. Quintiles represent successive fifths of nonfarm family units ranked by money income before taxes in the calendar year 958. The lowest quintile includes families with incomes of less than $2,240. Income ranges for the other-quintiles are: second, $2,240-54,080; third, $4,08-S3,779; fourth. $5,780- $8,095; and highest, $8,096 and over. Two per cent of all nonabout one-third of all renters and onetwelfth of all owners had occupied their present dwelling units less than one year. Families headed by persons 8 to 24 years of age moved most often; one-half of this group moved in 958, and two-thirds moved at least once in the period , as the accompanying chart shows. 3 Mobility of families decreases with home ownership and with age. Frequency of moving varies less with income than with age. Approximately 4 in 0 families in each of the four highest income quintiles have moved in the past three years. The proportion of movers who purchased houses, however, increased markedly from the second to the highest income quintile. Less frequent moving by families in the lowest fifth of the income scale reflects in large part the age characteristics of these Families were classified by age of head as of early 959 and income during 958. For some recent movers, income and age of head may have changed since they last moved. farm families that rent part of another family's dwelling arc included in the "other" category. "Other" also includes families that receive housing as part of compensation, live temporarily in houses they have sold, etc. Data for include some cases for early 959. families, of whom two-thirds are headed by persons 55 or more years of age compared with one-third or less in the other quintiles. The 959 Survey of Consumer Finances did not collect data on the previous housing status of families who moved in 958, but data from the immediately preceding Surveys suggest that about 4 in 0 house buyers in recent years owned a home just prior to purchasing. Most of the remaining buyers were former renters, although some were newly formed families or families that had been receiving housing rentfree.' Among both renters and owners in similar age groups, those who moved in the 4 Data from the National Housing Inventory of the Bureau of the Census show that about.5 million renters, including farm households, became owners in each of the years 955 and 956, and about 500,- 000 owners became renters. Data from the Survey of Consumer Finances and the National Housing Inventory appear to be comparable after allowing for differences in coverage and definitions.

32 HOUSING OF NONFARM FAMILIES 099 past three years assumed much larger monthly housing payments than were paid by those who did not move. Movement to a new address appears to have increased the frequency and amount of expenditures for household durable goods and equipment, although amounts spent in 958 by renters who did not..move in were about the same as for renters who moved. Home owners who purchased their homes during the past three years also made expenditures for property improvements more often and spent larger sums for such purposes last year than families who had purchased their present home before 956 (see Supplementary Table 5). A larger proportion of families who moved in had incurred personal debt and on average owed substantially more than their counterparts who did not move. Movers among renters under age 35, and among home owners in the age range 35 to 54, in particular, owed a great deal more personal debt than nonmovers, reflecting in part their more frequent purchases of new automobiles on credit. While those who rented or purchased their present dwelling during tended to hold liquid assets as often as those who did not move, their average holdings were generally somewhat smaller. Also, those who purchased a house in the past year owned liquid assets less frequently and they held smaller amounts than those who purchased one or two years earlier. Recent house purchases. Purchases of new or existing houses for owner-occupancy reached the highest level of the postwar period in 955, then declined through the first half of 958. The decline reflected in part the reduced availability of credit in the earlier part of the period and later the business recession of Although construction of new houses began to rise sharply in the spring of 958, new houses reaching completion and available for sale did not increase much until late in the year. Total house purchases, however, began to increase around midyear in response to the upturn in business activity and the easing of credit earlier in the year. For 958 as a whole total house purchases amounted to 2.5 million, the same as in 957- In both of these years a larger proportion of the reduced sales volume involved the purchase of an existing house. 6 An estimated 7 in 0 house buyers in each year purchased an existing house compared with about 6 in 0 in According to Survey data, one-third of the families who purchased houses in 958 paid $5,000 or more, and about tworfifths paid less than $0,000. The median price of all houses purchased was $2,300, somewhat above that for 957. As in past years, the average price of new houses in 958 was substantially higher than that of existing ones. Four-fifths of all house purchasers used mortgage credit. The median debt incurred was $9,300, about threefourths of the average purchase price. Market trends. While distributions of house purchase prices reported in the Sur- Purchases of existing houses frequently involve the assumption of a mortgage already outstanding on the property. According to the National Housing Inventory, in 4 existing house purchases in was of this type. That so large a proportion of these transactions are not directly dependent on new credit may partly explain why purchases of existing houses were relatively well maintained in compared with purchases of new houses. 8 Federal Reserve estimates based on data from various sources, including nonfarm housing starts from the Bureau of the Census and nonfarm mortgage recordings of $20,000 or less from the Federal Home Loan Bank Board. Annual data from the Survey of Consumer Finances, which are subject to relatively large sampling errors, suggest a similar shift to existing houses from 954 to 957, but a movement back to new houses in 958.

33 00 FEDERAL RESERVE BULLETIN SEPTEMBER 959 CHANGES IN HOUSING MARKET ACTIVITY PIBCIMTAOI DI»TRR>UTiON OF HOUtIS PURCHASED PRICE OF HOUSE El V«I f,, iii.mih.iii jisiii tii.in iii.mi in mi INCOME OF PURCHASE! LIIEtl IIIIIIU ( 4k IIIKJI IIIIIILE AGE OF PURCHASE! II- 4 H- H H 44 4S- S4 H 4 IS Ml MEI 936 5t NOTE. Data refer to nonfarm houses only and are weighted averages for each three-year period. Price of house and income of purchaser as of year of purchase; age of purchaser at time of interview early in the following calendar year. vey have varied somewhat from year to year, there has been a marked trend toward purchases of more expensive houses. Houses priced at $20,000 or more accounted for in 6 transactions in markets, compared with only in 2 five years earlier, as can be seen in the chart. The general rise in building costs and in property values contributed to this development, but there was also a substantial change in the quality of housing demanded. This is indicated by data from the Bureau of Labor Statistics which show that the average size of new single-family houses increased more than one-fourth from when relatively small units were being 00 built to the first quarter of 956. During the same period the proportion of houses with 3 or more bedrooms increased from slightly more than 3 in 0 to about 8 in 0. In addition, a greater proportion of the houses built in early 956 included a full basement, garage facilities, or such "extras" as a second bathroom or built-in appliances. The shift in demand to more expensive houses reflects the general increase in income levels as well as changes in income distribution and age composition of purchasers. The median income reported by all nonfarm family units in 958 was about $5,000, 50 per cent larger than in After adjustment for changes in the cost of living, the increase was about 28 per cent. Moreover, the higher income groups have accounted for a larger proportion of purchases than in earlier years. In the past three years families in the top income quintile have purchased about one-third of all houses sold, compared with one-fourth in and The proportion of purchases involving older families has also increased somewhat in recent years. Not only are many of these purchasers in the higher income groups but many have also accumulated liquid and other assets including equities in former homes which enabled them to purchase more expensive houses than younger families. A larger proportion of house purchases in recent years have been made by families who already owned a house. The most recent data show that in previous owners accounted for from 40 to 45 per cent of all house purchases, compared with 32 per cent in This development reflects to a great extent the fact that the proportion of home owners in each age

34 HOUSING OF NONFARM FAMILIES 0 group over 24 has been larger in recent years than it was a decade earlier. About 6 in 0 families headed by persons years of age, for example, owned a house early this year whereas only 5 in 0 owned in 949. In recent years previous owners have purchased more than half of the houses priced at $5,000 and over. Most of these families sold their former home to help finance the new purchase, although some continued to hold it as an investment property. 7 CURRENT HOUSING STATUS Early this year there were 50 million nonfarm families in the United States. While most of these families consisted of only one spending unit, about 4.2 million included related secondary spending units who shared living quarters.' Some characteristics of the housing of nonfarm families are discussed in the following paragraphs. Home ownership. In early 959 fiftyeight per cent of all nonfarm families owned the house they occupied, and another 37 per cent rented their living quarters. The remaining families occupied separate dwelling units received as part compensation for * According to the most recent Survey data, in 0 of those who already owned a house before they purchased another in 956 continued to hold their former house for rental purposes. * A spending unit, as defined in the Survey, consists of all related persons living together who pool their incomes. Related persons in the household are separate spending units if they earn more than $5 per week and do not pool their incomes. Approximately 8 in 0 of these separate units are single persons who in most cases are either children of the head of the family or are retired persons over 65. Of the remaining units, less than one million are married couples, of whom about one-third are between the ages of 8 and 24 and may be living with their parents only temporarily. Most of the other couples living with relatives are considerably older, and in many cases are probably a more permanent part of the family. their services or as gifts from someone not living in the house with them. The frequency of home ownership increases with the age of the head of the family. According to the 959 Survey, it rose sharply between the ages of 8 and 40, and then more slowly until age 65. Six in 0 families headed by persons years of age owned their home; this proportion was three times as large as for families 5 years their junior and only slightly smaller than for older families. More than 6 in 0 families headed by persons 65 or more years of age continued to be home owners, even though many of these families had experienced a decline in income because the head had retired from the labor force. Home ownership varied from 8 in 0 families in the highest income quintile to somewhat less than 5 in 0 in the two lowest. That so large a proportion of families in the lowest quintile owned their own home is attributable primarily to the large number of retired families in the group. Renters for the most part occupy houses or separate apartments, although a small number share living quarters occupied by other families. Early this year more than one-half of all renters probably lived in - or 2-family dwelling units. Data from the National Housing Inventory of the Bureau of the Census relating to the end of 956 indicate that more than 3 in 0 nonfarm rental units were single-family houses and about 2 in 0 were two-family units. Even inside standard metropolitan areas, more than 4 in 0 were - or 2-family units. House value. Each home owner interviewed in 959 was asked to estimate the current market value of his house (including lot). About 6 per cent of the families valued their houses at $20,000 or more and

35 02 FEDERAL RESERVE BULLETIN SEPTEMBER 959 HOME OWNER CHARACTERISTICS, EARLY 959 NONFABM FAMULUS OROUPI0 BT AO! Maont, ihoutono * ol dollntt P»r c«ni RATIO OF MORTGAGE DEBT TO HOUSE VALUE VALUE OF HOUSE J 5 MORTGAGE MONEY DEBT INCOME OWNERS WITH _ MORTGAGE DEBT 5-34 JS S.4 SS - *4 OVIi AGE OF HEAD I H 0 NOTE Number of home owners in the 8-24 Mje group too few to show separately. 2 per cent at less than $5,000. The median value was $2,000, and the mean $2,900.* Families in which the heads were in the age groups owned houses with higher mean values than those of other age groups, and they also had higher average incomes, as the chart shows. Mean house values ranged from $7,500 for families in the lowest income quintile to $8,300 for those in the highest. Most home owners in the lowest quintile lived outside large cities and suburbs in areas where incomes are somewhat lower; one in five was nonwhite. Mortgage debt. Approximately 5 6 per cent of the home owners interviewed this year reported that their homes were mort- Mn 950, owners* estimates of house value were checked against estimates made by professional appraisers. While there were many differences between the two sets of estimates, owners' estimates showed no significant bias toward overvaluation or undervaluation. gaged. An estimated 6 million families owed $06 billion of debt secured by properties that they estimated were worth twice that much in current markets. One-half of the debtors reported mortgages that were less than 50 per cent of the house value, and only one-tenth reported mortgages in excess of 80 per cent. Home owners with incomes of $6,000-$0,000 had mortgaged houses more frequently and had a higher ratio of debt to house value than owners in either lower or higher income brackets. Mortgagors with incomes of $0,000 or more, however, had the largest debts on the average; about 4 in 0 in this group owed $0,- 000 or more compared with 2 in 0 for all mortgagors. The incidence and amount of mortgage debt are closely related to how recently the owner acquired his present house and to his age." Whereas 80 per cent of those who purchased homes in the past three years had mortgages, less than one-half of those who purchased in owed such debt. For those having mortgaged houses, the average ratios of debt to value for the two groups were 66 per cent and 26 per cent, respectively. The low ratio for the latter reflects both the general increase in property values and the reduction in the amount of mortgage as principal was repaid. Nearly one-half of all mortgage debt on owneroccupied properties in early 959 was on residences that had been acquired in the preceding three years. Most of these mortgages were owed by persons under 45 years w Many mortgages currently outstanding, howevet, were not associated with the house purchase. Data from National Housing Inventory show that in 6 of the mortgages on single-family nonfarm houses at the end of 956 had been placed after the house had been acquired. While most of these involved refinancing of a previous mortgage, a significant proportion were placed on unencumbered properties.

36 HOUSING OF NONFARM FAMILIES 03 of age who accounted for 2 out of 3 house purchases in The proportion of families owning an encumbered property and the average amount of their debt decline steadily after the age of 34. Home owners in the age group, for example, owe less mortgage debt on the average than younger families, although at the same time they own houses of considerably higher average value, as is shown in the chart on the opposite page. This reflects in part the fact that older families have owned their homes longer on the average than younger families and that on most of these mortgages repayments have been made under regular amortization schedules. Even among recent house purchasers, moreover, older families used mortgage financing less frequently than younger families. Those who used such financing assumed about the same amount of debt as younger families, but they generally bought higher priced houses. Many of the older purchasers transferred liquid assets or the equity accumulated in a previously owned house to the newly acquired property. CHANGES IN HOUSING, A marked expansion in consumer income and an improvement in the standard of living has accompanied the rapid growth of the population during postwar years. A strong demand for more and better housing has resulted in a record volume of housing construction, which has improved greatly the quality of housing accommodations. Over the period since 946 the number and proportion of owner-occupied houses have increased, and house values have risen. In the early postwar years, the number of families who established separate households and the number who became home owners exceeded by a substantial margin the number of new housing units constructed. During this period a significant part of the demand for home ownership and for separate accommodations was filled by sales of rental units for owner-occupancy and by subdivision of existing dwelling units into smaller units. Since 950, however, construction of new units has consistently exceeded the net increase in households. This has permitted a withdrawal from the housing stock of some of the less desirable units and a return of others to seasonal use. Home ownership. Over the past decade the number of home owners increased from HOUSING STATUS, SELECTED YEARS NUMBER OF NONFARM SPENDING UNITS Millioni HIITHEI OWNS NOl IIHIS IIVU WITH UlAllvii INI! OWN* million to nearly 29 million, as shown in the accompanying chart. The number of renters also increased from 7.4 million to 8.4 million as newly formed families who rented were more numerous than rent- " The Bureau of the Census estimates that about three million dwelling units that had been rented in 940 were owner-occupied in 950. While many transfers of this type occurred during the war, probably equally as many took place in the latter half of the decade. Most units involved were single-family houses

37 04 FEDERAL RESERVE BULLETIN SEPTEMBER 959 ers who became home owners. The number of spending units living with relatives, on the other hand, declined from 6.6 million in 949 to about.4 million this year, as married couples and single persons continued to seek separate living quarters soon after they acquired financial independence. Only 8 per cent of all nonfarm spending units lived with relatives early this year, whereas 4 per cent did so in 949. The sharp increase in number of homeowning families from 949 to early this year reflected both the growth in the total number of families and an increase in the proportion of home-owning families from 5 per cent to 58 per cent. Ownership is more frequent for families of all age groups except those under 25 years. 2 From early 949 to early 959, the proportion of home owners increased 80 per cent among families between the ages of 25 and 34 in 949, and even increased significantly for those in the age group of in 949. Extension in coverage of social security programs and growth in other retirement programs have probably influenced the decision of many older families to seek a home of their own or to retain ownership after the head of the family has retired. House value. In the past decade the value of owner-occupied residential properties has doubled and the equity of owners has increased three-fourths. On the basis of estimates made by home owners included in the Survey, the aggregate value of nonfarm houses in early 959 was $372 billion,,a In the early postwar years, there were many veterans in this age group who were able to acquire houses by using VA-guaraoteed financing on which private lenders required little or no downpayment. With the passing of time this age group has contained fewer veterans, and others in the group have had to resort to FHA-insured or conventional mortgages on which larger downpayments are customary. MORTGAGE STATUS OF NONFARM OWNER-OCCUPIED HOUSES Status Number In millions: Total Mortgaged Nonmortgaged Percentage distribution: Nonmortgaged Value In billions of dollars: Total Debt rJf Percentage distribution: Debt Exclude! about 400,000 trailers, which were owner-occupied. NOTB. Derived from estimates of current value of, and mortgage debt outstanding on. individual houses as submitted by owners. as indicated in the table. This compares with a total of $83 billion for early 949. The growth in value has been due primarily to investment in new houses, which increased both the number and average value of houses. The general increase in market prices of the existing housing stock including the increase in prices of houses added during the past 0 years and the large sums spent for property improvements were also important factors. The average value of all nonfarm owner-occupied houses rose from $9,00 in 949 to $2,900 in early 959." 3 Data from the National Housing Inventory show that single-family houses which were the same unit in 956 as in 950 increased in vatue by one-third. The increase was fairly uniform for most value classes and was influenced little by the age of the property.

38 HOUSING OF NONFARM FAMILIES 05 Expenditures by nonfarm home owners for property improvement and repairs are estimated to have ranged from $6 billion in 948 to an average of $9 billion in the past three years. Landlords in the meantime have spent an estimated $-.5 billion annually for similar purposes. National Housing Inventory data give some indication of the improvements resulting from such expenditures. These data show that 3.4 million houses (including some farm units) classified in 956 as nondilapidated with all plumbing facilities had been upgraded from units that had been dilapidated or that lacked facilities in 950. Not all properties, however, had been kept in good repair. About.9 million units that had been in good condition in 950 had become dilapidated by 956; the majority of these were rental units, most of which lacked facilities in 950." Mortgage debt. Debt secured by owneroccupied houses expanded threefold from 949 to $06 billion in early 959, as the number of mortgaged homes and the average size of mortgage increased. Encumbered houses increased from 9 million or 45 per cent of all owner-occupied houses in 949 to 6 million or 56 per cent early this year. The increases in the number of houses mortgaged and in the amount of debt outstanding are due almost entirely to the debt placed on houses built since 949; most of this debt resulted from the financing of house purchases. About 85 per cent of all houses purchased in each year since 949 have involved the use of mortgage credit, according to Survey data. Additions to mortgage debt during the past decade that have resulted from purchases of houses built before 949 have apparently been offset by the amounts repaid on all houses built before that time. 5 The rate of expansion in the average mortgage outstanding during the past 0 years from $3,700 to $6,650 was twice that in the value of mortgaged properties. As a result, the average ratio of mortgage debt to house value rose from 37 per cent to 47 per cent. Both the continued high level of house purchases and the liberalization of mortgage terms to permit a higher ratio of original loan to purchase price and longer repayment periods contributed to this development. The ability of mortgagors to carry the larger mortgage debt, on balance, appears to have been maintained. In 958 as in 948, mortgagors used about 2 per cent of their income to meet their monthly mortgage payments. " Data from the same source show that about 85 per cent of the 2.5 million units demolished or lost from the housing stock between 950 and 956 were rented or vacant at the beginning of the period, and most were dilapidated or lacked facilities. Of the single-family owner-occupied houses lost, two-thirds had an estimated market value in 950 of less than the $3,900 median value indicated by the Survey of Consumer Finances. National Housing Inventory data indicate that the amount of mortgage debt on single-family houses built before 950 and still in the inventory in 956 was about the same in 956 as in 950, and the number mortgaged was slightly smaller. Only a relatively small number of the houses built before 950 had disappeared from the housing stock by 956, and the value of the remaining units had increased substantially.