Debt Relief and Slow Recovery: A Decade after Lehman

We follow a representative panel of millions of consumers in the United States from 2007 to 2017 and document new facts on the long-term effects of the Great Recession. There were about six million foreclosures over this period. Only a quarter of foreclosed households regained homeownership, taking an average four years to do so. This persistent loss of homeownership accounts for most of the decline in the U.S. homeownership rate. Despite massive stimulus and debt relief policies, house prices, consumption, and unemployment remained below pre-crisis levels in about half of the zip codes in the United States Regions that recovered to pre-crisis levels took on average four to five years. Regional variation in the extent and speed of recovery is strongly and persistently associated with frictions affecting the pass-through of lower interest rates and debt relief to households.