The Northern Trust, an investment management company, has put out a opinion paper in response to the Federal Reserve's flow-of-funds report. It can be found here.
From the paper:
Some might respond that with all the different sources of credit available to households today, they do not need to hold as large a ratio of liquid assets as in the past. To this I would respond with three counter-arguments. Firstly, households already have borrowed so much that their leverage ratio is at a post-WWII high (see Chart 13). Secondly, households have already borrowed so much that their debt service burden is at a 25-year record high (see Chart 14). And thirdly, residential real estate, which accounts for 30.5% of the total market value of household assets (see Chart 15), is the single largest asset in households’ portfolios compared with deposits, credit market instruments, corporate equities (about 44% of which are held on their behalf in pension funds and insurance companies) and other tangible assets. Of these other asset categories, residential real estate probably is the least liquid, aside from used refrigerators (other tangible assets). In sum, households have never been as highly levered as they are now or as illiquid as they are now, and their single largest asset is in danger of actually falling in value.