For households that face a possibility of moving across MSAs, the
risk of home owning depends on the covariance of the sale prices
of their current houses with the purchase prices of their likely future
houses. We find empirically that households tend to move between
highly correlated MSAs, significantly increasing the distribution of
expected correlations in real house price growth across MSAs, and
so raising the "moving-hedge" value of owning. Own/rent decisions
are sensitive to this hedging value, with households being more likely
to own when their hedging value is greater due to higher expected
correlations and likelihoods of moving. JEL (D14, R21, R23, R31)
Sinai, Todd, and Nicholas Souleles.
"Can Owning a Home Hedge the Risk of Moving?"
American Economic Journal: Economic Policy,
Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
Housing Supply and Markets