Do Borrowing Constraints Change U.S. Homeownership Rates?

Linneman, Peter; Megbolugbe, Isaac F.; Wächter, Susan M.; Cho, Man

doi:10.1006/jhec.1997.0218

Cited by 46 publications

(22 citation statements)

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“…However, the empirical literature finds that wealth constraints are more important than income constraints when purchasing a home. See for example Linneman, Megbolugbe, Watcher, and Cho (1997) or Quercia, McCarthy, and Watcher (2000). 20 These assumptions simplify the computation of the model, while allowing us to consider both down payment requirements and home equity loans without the need for modeling specific mortgage contracts or mortgage choice.…”

Section: Market Arrangementsmentioning

confidence: 99%

House prices and risk sharing

Hryshko

Luengo‐Prado

Sørensen

2010

Journal of Monetary Economics

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Are home owners better insured against calamities when house prices go up? We examine the impact of home ownership on nondurable consumption risk sharing, taking into account the dual role of housing as a shelter and as an asset with very special characteristics. Using data from the PSID we find that homeowners smooth consumption more than renters and consumption smoothing improves when houses appreciate in the area of residence. Next, we calibrate and simulate a model designed to match the main features of home ownership as captured by our empirical regression. We find that a suitably calibrated version of the model is able to reproduce the data quite well.

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Section: Market Arrangementsmentioning

confidence: 99%

House prices and risk sharing

Hryshko

Luengo‐Prado

Sørensen

2010

Journal of Monetary Economics

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“…See for example Linneman et al (1997) or Quercia et al (2000). 3 This assumption simplifies the computation of the model.…”

Section: Market Arrangementsmentioning

confidence: 99%

On the user cost and homeownership

Díaz

Luengo‐Prado

2008

Review of Economic Dynamics

117

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This paper studies the differences in the cost of housing services for renters and homeowners and calculates the bias that results when we value owner-occupied housing services using a rental equivalence approach. Our framework is a life-cycle model with endogenous tenure choice with households facing idiosyncratic uninsurable earnings risk and housing price risk. We model houses as illiquid assets that provide collateral for loans. To analyze the impact of preferential housing taxation on the tenure choice and the bias, we consider a tax system that mimics that of the US economy. Namely, owner-occupied housing services are not taxed and mortgage interest payments are deductible. Through simulations, we show that a rental equivalence approach (relative to a user cost approach) overestimates the cost of housing services. The magnitude of the bias is very sensitive to both the income tax rate and the size of adjustment costs in the housing market.JEL classification: E21; C80; E39

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“…These analyses tend to focus on issues such as the availability of mortgage credit (Linneman et al, 1997), the age of the individuals (Asberg, 1999;Haurin et al, 1994), the role of expectations of house-price movements (Ermisch and Di Salvo, 1996), demand and supply constraints (King, 1980;Whitehead, 1999) and also the interrelations of each of these with demographic (Haurin et al, 1997) and labour market issues (Zorn, 1989). This rich literature means that most of these analytical arguments are now well-rehearsed.…”

Section: Introductionmentioning

confidence: 99%