The recent crises in the housing and mortgage industries created major threats to the financial security of the millions of households that lost home equity. Long thought to be a safe and prudent investment, homeownership suddenly became risky and precarious, exposing homeowners, particularly low- and moderate-income homeowners, to financial vulnerability. Subsequently, experts have called for a reexamination of the goal of homeownership and have urged the nation to rethink the American Dream. But even during the housing crisis and in the aftermath of the economic downturn, home equity has continued to be a major part of the balance sheet for American households.

This paper uses panel data from the Survey of Consumer Finances, the most comprehensive source of information on household finances, to examine homeownership as a component of the household balance sheet. It explores the various trajectories of wealth loss and gain for distinct segments of homeowners between 2007 and 2009. We look at the data set’s total population of homeowners and at subsamples defined by characteristics in 2007. We chose these subsamples because they have characteristics implicated in prior findings concerning differential wealth trajectories. In this paper, we examine “typical” homeowners and then divide the sample by race and by 2007 wealth quintile.

The results indicate that the balance sheets of homeowners vary widely in the period from 2007 to 2009. American homeowners hold their assets in a variety of accounts and products, some formal and others informal. They owe many types of debt. The balance sheets of most homeowners in the sample are dominated by housing assets and mortgage debt. Few households outside of the wealthiest group own substantial financial or retirement assets. We also find that most homeowners lost wealth during the 2007–9 recession, but we observe diverse trajectories across households. A small number of households experienced monumental gains and losses in wealth, but most experienced relatively small shifts. Specifically, we find that the typical household lost between $30,000 and $40,000 in wealth in this two-year period; this is about 10% of that household’s 2007 wealth, and the decline in housing value accounts for most of the change. Although the odds of any loss of wealth are similar across racial groups, Black homeowners are significantly more likely than homeowners of other races to lose a large portion of net worth in the downturn. Households with higher net worth in 2007 were more exposed to financial markets and experienced large losses but fast recovery.

In spite of the turmoil of the recession, most homeowners started and finished the period in the same wealth quintile. The turmoil did not dislodge the owned home as the central component of household balance sheets. Thus, policy around wealth and assets should continue to recognize the importance of secure, affordable, and fair homeownership in the investment decisions of families.