Housing Consumption and Homeownership
Sunday, Jan. 8, 2017 6:00 PM – 8:00 PM
- Chair: Michael Eriksen, University of Cincinnati
Borrowing Constraints and Homeownership Over the Recent Cycle
AbstractThis paper identifies for the first time the impact of borrowing constraints in the recent decline in homeownership rates. Using data from the Survey of Consumer Finance (SCF), we measure the combined impact of income, wealth and credit constraints on homeownership outcomes over time. It has been established that credit supply loosened during the 2004-07 period and then became considerably more restricted in the wake of the Great Recession. Homeownership has also declined. However, the impact of this tightening of credit on probability of individual households to become homeowners has not previously been estimated. Using estimations of borrowing constraints going back to 2001, we identify the impact of earlier period borrowing constraints compared to those of 2010-13 on population level U.S. homeownership rates.
Systemic Banks, Mortgage Supply and Housing Rents
AbstractWe show that tighter mortgage lending standards after the Great Recession have led to higher housing rents. U.S. banks, especially those deemed systemically important, have increased their propensity to deny mortgage applications, particularly among FHA loan applicants and black and Hispanic borrowers. Tighter standards have increased demand for rental housing and led to higher rents, depressed homeownership rates, greater construction of multifamily housing, and lower rental vacancies. These effects are stronger in MSAs with barriers to using online lending platforms, such as age and internet accessibility, and where regulations inhibit competition among alternative lenders.
Portfolio Demand and Housing Consumption Risk Hedging: Evidence From Geographic Variations in Housing Supply
AbstractUsing recent waves of PSID in the U.S., we show that households in metropolitan areas with less elastic housing supply invest a relatively larger fraction of their financial wealth in risky assets (stocks). We explain this stylized fact using a household portfolio choice model with both housing and nonhousing consumption, where the optimal holding of the risky assets is additionally motivated by households’ hedging incentives against unfavorable housing price risk. We show that such motive is dependent on location and household lifecycle: it is stronger in places with less elastic housing supply and for young households on the rising path of lifecycle housing consumption profile. Our findings indicate that, besides adjusting homeownership choices, households also rely on financial asset as a means of hedging against housing consumption risk.
- G2 - Financial Institutions and Services
- R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location