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.
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 School of Business.
(Photo Credit: UAB)
These are UAB researchers Stephanie Rauterkus, Ph.D., and Andreas Rauterkus, Ph.D.
(Photo Credit: UAB/Steve Wood)