Household Finance and Consumer Behavior
Friday, Jan. 5, 2018 10:15 AM - 12:15 PM
- Chair: Richard Green, University of Southern California
Does Collateral Value Affect Asset Prices? Evidence From a Natural Experiment in Texas
AbstractThis paper identifies the impact of collateral value on house prices, exploiting law changes in Texas which legalized home equity loans in 1998. The impact of this credit expansion was positive, heterogeneous and direct. The laws increased Texas house prices 3.8%; this is price-based evidence that households are credit constrained. Prices rose more in locations with inelastic supply, higher prelaw house prices, population, income and employment. These estimates reveal that wealthier households value the option to pledge their home as collateral more strongly. Further estimates indicate that the effect occurred directly, as variables related to house prices were unaffected.
Home Equity and the Timing of Claiming Social Security Retirement Income
AbstractThis paper examines how changes in house prices affect the timing of when eligible individuals decide to start receiving Social Security Retirement Income (SSRI). As changes in the price of housing and SSRI withdrawal decisions are likely to be correlated with unobserved local demand shocks, we employ an instrumental variables strategy using the land supply elasticity of an MSA interacted with changes in the national housing price index as an instrument for the value of a home. We find that an increase in the value of a home causes elderly individuals to delay SSRI claiming once they are eligible during the housing boom period, but we do not find a statistically significant impact on the claim decision during the bust period. Our findings highlight the potential channel of cashing out home equity in replace of receiving SSRI early for seniors to finance retirement during the housing boom period.
- R2 - Household Analysis
- D1 - Household Behavior and Family Economics