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  3. American Economic Review
  4. May 2016
  5. To Buy or Not to Buy: Consumer Constraints in the Housing Market

To Buy or Not to Buy: Consumer Constraints in the Housing Market

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Abstract

We use a strategic household survey to study the sensitivity of intended homeownership decisions to financing constraints. We find that the average stated likelihood of buying a home is strongly sensitive to the size of the required down payment, which we vary exogenously across three scenarios. This sensitivity is particularly high for respondents that appear more liquidity constrained based on observable characteristics (including current renters, or owners with low savings or low home equity). For renters, expectations of future rent inflation and of improvements to their personal financial situation also predict intention to buy.

Citation

Fuster, Andreas, and Basit Zafar. 2016. "To Buy or Not to Buy: Consumer Constraints in the Housing Market." American Economic Review, 106 (5): 636-40. DOI: 10.1257/aer.p20161086

Additional Materials

JEL Classification

  • D14 Household Saving; Personal Finance
  • R21 Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
  • R31 Housing Supply and Markets