Housing bubble: The "Wealth" is Gone, but the Debt Remains

From Floyd Norris at the NY Times: Despite Recovery, Younger Households Are Slower to Make Gains

THE total wealth of American households has recovered from the financial crisis and Great Recession, according to the Federal Reserve Board. But ... many Americans, particularly younger adults who took on heavy debt to acquire homes before the housing bubble collapsed, are lagging.
...
During the housing boom, said William R. Emmons, the chief economist of the Center for Household Financial Stability at the Federal Reserve Bank of St. Louis, “exactly the people you would think need to act conservatively were doing the opposite.” Homeownership rates, and mortgage debt levels, rose for younger households, as well as for less educated and minority ones. Those groups suffered more during the crisis, he said, and have been slower to recover.

Mr. Emmons compiled average wealth figures for different groups from the triennial surveys ... older households are down just 3 percent on average, while those headed by middle-age people are down about 10 percent. But the decline is nearly 40 percent for the younger group.

During the housing boom, households ended up with more of their wealth in real estate than before, and mortgage debt rose to record levels relative to the size of the economy. The proportion of wealth in homes is now back to close to the level of the 1990s, but the debt levels remain high by historical standards.
emphasis added

Click on graph for larger image.

This graph based on the Fed's Flow of Funds report shows household real estate assets and mortgage debt as a percent of GDP.  

As Norris noted, the bubble wealth is gone, but the debt remains (still high on a historical basis). This was especially hard on younger households since they bought during the housing bubble.