Foreclosures and the MI Economy, Consumer Finance Survey

I recently completed a paper on the Michigan households’ responses to the financial and economic crisis. Among other things, an analysis of data from the MSU State of State Survey shows that Michigan households which experience an income decline are not significantly adjusting their spending plans relative to those whose incomes have not declined. While they are not smoothing consumption noticeably, they are using their retirement savings, like many others in the sample.   Another MSU-based study focused on consumer finance gives more detail about how households are responding, including with respect to past and future foreclosure plans. In this survey conducted between June 2009 and April 2010, 40% of households had at least one person in the household to lose his or her job or take a pay cut in the last 6 months. Of the respondents, 11% had been late on a rental or mortgage payment in the last year, 4% had been involved in foreclosure proceedings in the last two years, and 2% anticipate being in foreclosure proceedings in the next 2 months. While the data show that Michigan entered the foreclosure crisis earlier than most states, according to the New York Fed, foreclosure rates are beginning to rise faster than in the US overall (since mid-2009), and mortgage delinquency rates (90 days+) are increasing across the state relative to a year ago. Foreclosures have been temporarily halted by a number of banks, but repossessions continue by other banks in the state.

If you would like to take part in the second survey mentioned above, go to mimoneyhealth.org. This site is interactive, and respondents also receive a score and information on financial resources — web sites, etc. — based on analysis of the information received.

New Data, New Paper on Michigan Households

The Census reported at the end of September that real personal household income in Michigan fell more than in any other state, 6.2%, between 2008 and 2009 (http://www.census.gov/prod/2010pubs/acsbr09-2.pdf).  This is striking but not surprising, given longer-term trends.  My new paper on the Michigan economy evaluates how Michigan households are responding to the financial and economic crises using data from the State of the State Survey.  It will be posted at the web site for the Institute for Public Policy and Social Research at MSU shortly.  One of the most interesting, although not altogether unpredictable, findings is that spending plans (budgets) adjust flexibly to positive income shocks but less flexibly to negative income shocks.  In general, Michigan households are using both consumption-smoothing (changing spending plans)  and income-smoothing (diverting retirement savings to other expenses, e.g., food and health) instruments to respond to idiosyncratic and macroeconomic shocks.  There are a number of interesting results in the paper, so stay tuned.

Welcome

Welcome to the MI (Michigan) Economy Blog. The postings here will relate to timely issues relevant to the Michigan economy and sometimes to the U.S. and global economy and to microeconomic conditions (consumer finance).