Foreclosed American Dream? Parental Foreclosure and Young Adult Children’s Homeownership

In this study, I investigated the homeownership decisions of young adult children who experienced parental foreclosure. Results from a linear probability model using data from the Panel Study of Income Dynamics showed that young adults were less likely to become homeowners following parental foreclosure and that foreclosures between 2009 and 2011 had the strongest negative effects. Young adults who lived in low-foreclosure states, who lived outside their parents’ county, and who were more financially prepared were affected more. This evidence suggests that the parental foreclosure effect was unlikely to operate through common economic shocks at the state or county level or through parental financial transfers, implying potential psychological effects of parental foreclosure. These findings reveal an intergenerational correlation of negative housing experiences and highlight the importance of designing and providing counseling services not only for owners of foreclosed homes but also for their family members.