Economics of Home Ownership
Sunday, Jan. 7, 2018 8:00 AM - 10:00 AM
- Chair: Judith Ricks, U.S. Consumer Financial Protection Bureau
Do Homeowners Save More Than Renters? Evidence From the Panel on Household Finances
AbstractIn this paper we analyse the impact of property ownership on the saving behaviour of households. We are particularly interested in investigating whether homeowners save more than renters or not. A related question is whether mortgage payments and other regular savings are substitutes or complements for German households. To answer these questions we use a large cross-sectional dataset on individual households’ finances and employ a matching estimator. We find that households owning property and repaying mortgages do save more than renters, if contractual savings and mortgage payments are summed up. However, the difference between regular active savings flows of renters and owners is small and insignificant. Owners do not seem to substitute other contractual savings with mortgage payments.
Home Sweet Home: (Mis-)Beliefs About the Extent to Which Home Ownership Makes People Happy
Abstract"Home sweet home" or the belief that home ownership makes people happy is probably one of the most widespread intuitive theories of happiness. However, whether home ownership delivers what it promises is an open question. Based on individual panel data, we explore whether homebuyers systematically overestimate the happiness associated with living in their privately owned property. To identify potential prediction errors, we compare people's forecasts of their life satisfaction in five years time with their actual realizations. We find that while moving into a purchased dwelling is associated with higher life satisfaction, people systematically overestimate the long-term satisfaction gain. Moreover, misprediction seems most pronounced for people who follow extrinsically-oriented life goals. In sum, our results suggest that people, on average, hold inaccurate beliefs about the extent to which home ownership makes them happy.
Job Separation Risk and Home Ownership: Evidence From Assistant Professors
AbstractExpected mobility is one of the most important factors affecting the home purchase decision. We explore a unique setting -- the academic job market -- with unique institutional details that provide measurable, exogenous variation in ex ante moving rates due to institution-specific promotion-and-tenure probabilities. Using historical course catalogues, we compile a dataset recording the subsequent rank of all newly hired assistant professors at the top 50 public U.S. economics departments since 1995, amounting to 1525 individuals. We then decompose the ex ante moving rate for a newly-hired assistant professor at a given institution into the product of two factors: the hazard of job separation prior to tenure review, and the probability of not receiving tenure conditional upon staying until that year. Next, using public records, we record if, when, and how much these individuals spent on owner occupied housing during their junior career. Along with this we record and control for a number of individual-level characteristics, including salary and publishing record, and institution-specific characteristics, such as the availability of substitute job openings in the area, and real estate affordability. Finally, we study the impact of job separation risk on the decision to purchase a home. In order to account for unobservable characteristics such as risk tolerance, self-perceived tenure probability, and family ties, we also survey all assistant professors in this dataset still on the tenure track. We report results with this robustness check for 151 individuals who completed the survey in full.
- D1 - Household Behavior and Family Economics