Featured Research

from universities, journals, and other organizations

Consumer behavior and lifestyle traits influence foreclosure rates

Date:
January 14, 2010
Source:
University of Alabama at Birmingham
Summary:
A homeowner's station in life and personal spending beliefs and habits are important indicators of the borrower's potential for home-mortgage default, say researchers.

A homeowner's station in life and personal spending beliefs and habits are important indicators of the borrower's potential for home-mortgage default, say researchers in the University of Alabama at Birmingham (UAB) School of Business.

Related Articles


"Our research has shown that a borrower's personal traits and behaviors have considerable influence on their willingness and ability to repay a mortgage loan and avoid foreclosure," says Stephanie Rauterkus, Ph.D., UAB assistant professor of finance.

"Traditionally, the industry has focused on default pressures like income, credit scores or loan-to-home-value ratios, but our research has shown that borrowers who may look identical by these traditional measures could have very different default probabilities based on their behavioral characteristics," she says.

The study, Behavioral Determinants of Mortgage Default, was authored by Rauterkus, her husband Andreas Rauterkus, Ph.D., UAB assistant professor of finance, and Grant Thrall, Ph.D., professor of geography at the University of Florida.

The researchers considered a sample of 7,000 mortgages from public records in Jefferson County, Ala. Borrowers were classified into one of 12 so called LifeMode groups, which were based on classifications established by the Environmental Systems Research Institute (ESRI).

"The research revealed that affluent, well-educated and older borrowers 55 years and up were significantly less likely to experience a mortgage default," says Stephanie Rauterkus. "Further, those borrowers who are less likely to default live in newer, well-developed suburbs or in city high-rise dwellings or town homes."

Conversely, married borrowers in their 30s with multiple children who earn more modest incomes, a range between $40,000 and $80,000, and live in older, more established neighbors located near city centers are more likely to default, the researchers say.

Broken down by LifeMode classification, those in the groups High Society, Upscale Avenues, Senior Styles, Solo Acts, Scholars and Patriots and American Quilt were less likely to default. Homeowners in the Metropolis, Family Portrait, High Hopes, Global Roots, Factory and Farm and Traditional Living groups were more likely to default on their mortgages.

In a deeper analysis of the data, the team found cases in which extremely divergent default levels were reported between similar lifestyle groups. In one example, two groups with complementary income levels and other similarities in traditional default-pressure categories experienced dramatically different default patterns.

"This tells us that lifestyle is a more important determinant in the calculation of the probability of mortgage failure than is income," Andreas Rauterkus says. "Someone may have the income the pay off their mortgage, but if other lifestyle attitudes or views are considered, a borrower simply may choose to stop paying the mortgage in certain circumstances."

"Neighborhoods matter," Stephanie Rauterkus says. "Neighborhoods typically are made up of residents in similar life stages with similar lifestyle outlooks that make certain neighborhoods more susceptible to default trends than others.

"This idea is vitally important to lenders, policymakers and other entities involved in efforts to prevent further erosion in the housing market because it offers new insights into how and where rescue funds, counseling services and other relief mechanisms should be deployed and allocated," she says.


Story Source:

The above story is based on materials provided by University of Alabama at Birmingham. Note: Materials may be edited for content and length.


Cite This Page:

University of Alabama at Birmingham. "Consumer behavior and lifestyle traits influence foreclosure rates." ScienceDaily. ScienceDaily, 14 January 2010. <www.sciencedaily.com/releases/2010/01/100114143511.htm>.
University of Alabama at Birmingham. (2010, January 14). Consumer behavior and lifestyle traits influence foreclosure rates. ScienceDaily. Retrieved October 31, 2014 from www.sciencedaily.com/releases/2010/01/100114143511.htm
University of Alabama at Birmingham. "Consumer behavior and lifestyle traits influence foreclosure rates." ScienceDaily. www.sciencedaily.com/releases/2010/01/100114143511.htm (accessed October 31, 2014).

Share This



More Science & Society News

Friday, October 31, 2014

Featured Research

from universities, journals, and other organizations


Featured Videos

from AP, Reuters, AFP, and other news services

EU, Russia, Ukraine Seal Breakthrough Gas Accord

EU, Russia, Ukraine Seal Breakthrough Gas Accord

AFP (Oct. 31, 2014) Russia agrees to resume gas deliveries to war-torn Ukraine through the winter in an EU-brokered, multi-billion dollar deal signed by the three parties in Brussels. Duration: 01:10 Video provided by AFP
Powered by NewsLook.com
Alcoholic Drinks In The E.U. Could Get Calorie Labels

Alcoholic Drinks In The E.U. Could Get Calorie Labels

Newsy (Oct. 31, 2014) A health group in the United Kingdom has called for mandatory calorie labels on alcoholic beverages in the European Union. Video provided by Newsy
Powered by NewsLook.com
Relief After “gas War” Is Averted

Relief After “gas War” Is Averted

Reuters - Business Video Online (Oct. 31, 2014) A gas war between Russia and Ukraine has been averted. But as Hayley Platt reports a deal was only reached after Kiev's western creditors agreed to partly funding the deal. Video provided by Reuters
Powered by NewsLook.com
Malaria Threat in Liberia as Fight Against Ebola Rages

Malaria Threat in Liberia as Fight Against Ebola Rages

AFP (Oct. 31, 2014) Focus on treating the Ebola epidemic in Liberia means that treatment for malaria, itself a killer, is hard to come by. MSF are now undertaking the mass distribution of antimalarials in Monrovia. Duration: 00:38 Video provided by AFP
Powered by NewsLook.com

Search ScienceDaily

Number of stories in archives: 140,361

Find with keyword(s):
Enter a keyword or phrase to search ScienceDaily for related topics and research stories.

Save/Print:
Share:

Breaking News:

Strange & Offbeat Stories


Science & Society

Business & Industry

Education & Learning

In Other News

... from NewsDaily.com

Science News

Health News

Environment News

Technology News



Save/Print:
Share:

Free Subscriptions


Get the latest science news with ScienceDaily's free email newsletters, updated daily and weekly. Or view hourly updated newsfeeds in your RSS reader:

Get Social & Mobile


Keep up to date with the latest news from ScienceDaily via social networks and mobile apps:

Have Feedback?


Tell us what you think of ScienceDaily -- we welcome both positive and negative comments. Have any problems using the site? Questions?
Mobile: iPhone Android Web
Follow: Facebook Twitter Google+
Subscribe: RSS Feeds Email Newsletters
Latest Headlines Health & Medicine Mind & Brain Space & Time Matter & Energy Computers & Math Plants & Animals Earth & Climate Fossils & Ruins