A Presentation: Negative Net Worth: A Comparison of Survey of Consumer Finances (SCF) and Panel Study on Income Dynamics (PSID) Estimates

Abstract

This paper examines differences in estimates of the incidence of household negative net worth from two surveys – the Survey of Consumer Finances (SCF) and the Panel Study of Income Dynamics (PSID). The paper provides separate estimates for renters and homeowners. The paper also provides separate estimates of the incidence of negative housing equity and negative non-housing equity for homeowners. Three conclusions are reached. First, SCF estimates of the incidence of negative net worth tend to be substantially lower than PSID estimates for most age groups; although, differences are much less pronounced when liquid retirement assets are removed from the SCF net worth definition. Second, both surveys report unrealistic estimates of the incidence of negative housing equity given the record number of housing defaults. The underestimation of negative housing equity situations substantially limits the usefulness of these surveys for assessing economic conditions. Third, the high incidence of negative financial equity for younger homeowners is a major source of household financial exposure for this segment of the population.