Abstract
We propose a life-cycle model of the housing market with a property ladder and a credit constraint. We focus on equilibria which replicate the facts that credit constraints delay some households' first home purchase and force other households to buy a home smaller than they would like. The model helps us identify a powerful driver of the housing market: the ability of young households to afford the down payment on a starter home, and in particular their income. The model also highlights a channel whereby changes in income may yield housing price overshooting, with prices of trade-up homes displaying the most volatility, and a positive correlation between housing prices and transactions. This channel relies on the capital gains or losses on starter homes incurred by credit-constrained owners. We provide empirical support for our arguments with evidence from both the U.K. and the U.S.
Dokumententyp: | Paper |
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Keywords: | Housing Demand ; Income Fluctuations ; Overlapping Generations ; Collateral Constraint |
Fakultät: | Volkswirtschaft
Volkswirtschaft > Munich Discussion Papers in Economics Volkswirtschaft > Lehrstühle > Seminar für Dynamische Modellierung (aufgelöst) |
Themengebiete: | 300 Sozialwissenschaften > 300 Sozialwissenschaft, Soziologie
300 Sozialwissenschaften > 330 Wirtschaft |
JEL Classification: | E32, G12, G21, R21 |
URN: | urn:nbn:de:bvb:19-epub-494-0 |
Sprache: | Englisch |
Dokumenten ID: | 494 |
Datum der Veröffentlichung auf Open Access LMU: | 13. Apr. 2005 |
Letzte Änderungen: | 04. Nov. 2020, 18:22 |