Why Young People Are in Trouble

Housing debt burdens 20 and 30-somethings.


The plight of retirees and soon-to-be-retirees is well-known: They've lost much of their savings just as they're about to start living off that money. But less discussed is the plight of 20 and 30-somethings, who find themselves facing a different kind of financial crisis.

Because younger households tend to have more of their assets invested in housing (purchased through loans), they tend to have much more debt compared to older households that are more heavily invested in the stock market, according to JPMorgan Chase Bank. As housing prices have fallen, reducing the value of those leveraged investments, young people are finding themselves increasingly strained.

JPMorgan reports:

As a general rule, after households enter the 35 to 44 age range, the amount of housing they own increases only slightly, whereas after this point asset accumulation tends to shift towards financial assets. This particular pattern has left younger households more vulnerable to increased leverage as house prices have fallen. While the decline in housing and equity prices have hit young and old about equally, generally houses are bought with borrowed money, whereas most financial assets are not (at least not by households). This has caused the leverage ratio -- the ratio of debt to assets -- to soar for younger households, rising above 50 percent last year.