Borrowing constraints and the tenure choice of young households by Donald R. Haurin

Cover of: Borrowing constraints and the tenure choice of young households | Donald R. Haurin

Published by National Bureau of Economic Research in Cambridge, MA .

Written in English

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Subjects:

  • Home ownership -- Econometric models.,
  • Young adults -- Finance, Personal -- Econometric models.,
  • Mortgage loans -- Econometric models.

Edition Notes

Book details

StatementDonald R. Haurin, Patric H. Hendershott, Susan M. Wachter.
SeriesNBER working paper series -- working paper 5630, Working paper series (National Bureau of Economic Research) -- working paper no. 5630.
ContributionsHendershott, Patric H., Wachter, Susan M., National Bureau of Economic Research.
The Physical Object
Pagination23, [6] p. ;
Number of Pages23
ID Numbers
Open LibraryOL22412779M

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Specifically, potential earnings, the relative cost of owning a home, and especially borrowing constraints affect the tendency to own a home. In our sample of youth, 37% of households are constrained even after choosing their loan-to-value ratio to minimize the impact of the separate wealth and income requirements.

Borrowing Constraints and the Tenure Choice of Young Households were ages 14 to 21 in ; thus, our study from to includes youth ages 20 to 32, this being the age range when many people are saving toward their first home.

Borrowing Constraints and the Tenure Choice of Young Households The third variable is the dollar difference between the desired and constrained house values for highly constrained households: Wealth Gap: $ Shortage = (V* – VW) (Wealth Gap: High).

(4) The expected signs of the coefficients of all three variables when entered into the tenureFile Size: KB. Borrowing Constraints and the Tenure Choice of Young Households (– versus – ), but it is slightly greater in absolute value than that of the income constraint. Specifically, potential earnings, the relative cost of owning a home, and especially borrowing constraints affect the tendency to own a home.

In our sample of youth, 37% of households are constrained even after choosing their loan-to-value ratio to minimize the impact of the separate wealth and income by: Because borrowing constraints limit the quantity of housing that households are able to acquire as owners, he argued that the tenure-choice decision is driven not by the traditional ratio of the costs of owning Borrowing constraints and the tenure choice of young households book renting, but by an assessment of the level of.

Using a model of tenure choice, we find that absent all three constraints, the homeownership rate of low-income households in our sample would increase from to percent. Approximately half of this differential is attributable to households with impaired credit and those with ‘thin-file status,’ the lack of a substantial credit history.

Consumption and housing choice with borrowing constraints: when do constraints binds. In this appendix, I sketch the partial equilibrium problem of an infinitely-lived household that maximizes expected intertemporal utility. The household derives utility from the non-durable consumption cand from housing Size: KB.

This preference specification is standard in models of household behavior. Life-cycle and bequest considerations, endogenous labor supply, non-separability between housing and consumption, and housing tenure choice are ignored here.

The household faces the following budget constraint in any period. Consumption and Portfolio Choice over the Life-Cycle and portfolio choice with non-tradable labor income and borrowing constraints. Since la-bor income substitutes for riskless asset holdings, the optimal share invested in equities is particularly for young households, an important element for explaining the data.

Cross-sectional data from the Survey of Consumer Finances (SCF) enable us to identify two groups of households: those whose housing tenure status is unaffected by borrowing constraints, and.

In this paper we analyze the factors that affect the tenure choice of young adults, highlighting the impact of mortgage lender imposed borrowing constraints. The data set is a panel of youth age for the years marginal utility over the life cycle. In a period of low income, households will borrow to finance current consumption; households will repay in a period of high income.

In a world with perfect capital markets, households will be able to borrow the amount of money they desire to smooth their consumption. Group 1 contains only households whose tenure status is unaffected by borrowing constraints, i.e.

homeowners and unconstrained renters. Group 2 contains families whose tenure status may or may not be affected by borrowing constraints; this group is comprised of credit constrained by: Borrowing constraints and the tenure choice of young households”, This paper presents an ordered logit approach to model the optimal timing of buying a house during the life cycle.

The model is applied to three recent Belgian household budget surveys. Borrowing constraints and the tenure choice of young households”. Borrowing constraints and the tenure choice of young households”, (). City sizes, housing costs and wealth”, (). Financial constraints and house prices - an international perspective”, The impact of borrowing constraints on mobility and tenure choice”.

Transfer recipients increase the value of the home purchased, but by an amount that is much lower than possible if the transfer were fully leveraged.

In addition, transfers appear to help households achieve certain down payment thresholds that give favorable mortgage by: ).

Young households (Haurin et al. ) and minority households (Gyourko et al. ) are particularly subject to the effect of borrowing constraints, consistent with the lower homeownership rate observed among these groups.

In addition to income and wealth, a third constraint, credit quality is. Downloadable. Earlier research has shown that lender income and wealth constraint ratios discourage homeownership. This empirical research has been based on home purchasers using an 80 percent loan-to-value (LTV) fixed-rate conventional loan.

Employing the same assumption, we find that the constraints lowered the ownership rate of our young home purchasers. Endogenous Mortgage Choice, Borrowing Constraints and the Tenure Decision. By William C. LaFayette, we find that the constraints lowered the ownership rate of our young home purchasers by about 20 percentage points.

However, households are not restricted to putting 20 percent down and choosing a fixed- rate loan. When we allow. Get this from a library. Borrowing constraints and the tenure choice of young households.

[Donald R Haurin; Patric H Hendershott; Susan M Wachter; National Bureau of Economic Research.] -- Abstract: In this paper we analyze the factors that affect the tenure choice of young adults, highlighting the impact of mortgage lender imposed borrowing constraints.

Get this from a library. Borrowing constraints and the tenure choice of young households. [Donald R Haurin; Patric H Hendershott; Susan M Wachter; National Bureau. negative effect on the propensity to own than income (Linneman and Wachter ).

Young households (Haurin et al. ) and minor ity households (Gyourko et al. ) are particularly subject to the effect of borrowing constraints, consistent with the lower homeownership rate observed among these groups.

The Changing Route to Owner Occupation: The Impact of Student Debt. Mark Andrew Cass Business School, Finance, Homeownership, housing economics, housing policy, student debt, household formation and tenure choice, household formation and the impact of borrowing constraints on young adult homeownership in by:   Homeownership for Future Generations in the UK Show all authors.

Geoffrey Meen. Geoffrey Meen. Wachter, S. () Borrowing constraints and the tenure choice of young households, Journal of Housing Research, 8(2), Iacoviello, M.

() House prices, borrowing constraints and monetary policy in the business cycle, Cited by: 7. Citations (). Analysis of panel data. Borrowing constraints and the tenure choice of young households,Author: Luis Diaz-Serrano. A Renter or Homeowner Nation. Arthur Acolin University of Southern California Laurie S.

Goodman Borrowing constraints also affect tenure outcomes if they delay or prevent access to homeownership (Linneman and Wachter, ). among young households drove the changes in homeownership during that period, contrary to.

A model of housing tenure choice. Access: perceived or real, and to what. Accuracy of preventable hospitalization rates for measuring access to care in rural communities. Borrowing constraints and the tenure choice of young Households.

Determinants of health insurance status among young adults. ().Author: Swarnankur Chatterjee. Borrowing Constraints and the Tenure Choice of Young Households NBER Working Paper No. w Number of pages: 30 Posted: 13 Apr Last Revised: 16 May   Young adults in are more racially diverse and are skewed younger than young adults inwhich added 12 percent, oryoung adults, to the homeownership gap during this time period.

The incomes of young adults have grown modestly sinceand fewer young adults are participating in the labor force; contributing to the decline. In recent years the findings from econometric models of tenure choice suggest that binding borrowing constraints drives access to homeownership.

That is the inability to meet the deposit requirements of house purchase and/or the mortgage repayment conditions is critical in explaining tenure outcomes. Though much of this research is United States.

We examine how a household's stock investment depends upon the state variables identified in our theoretical analysis, including the housing tenure choice, house-value–net-worth ratio, age of the head of the household, net-worth–income ratio, and other variables previously shown in the literature to affect portfolio decisions, such as total Cited by: In this report, we are concerned with the impact of the current system of residential stamp duty.

Not only does stamp duty have an effect on the housing market, but it also discriminates between both different parts of the country and different household types. Because of the inefficiencies and inequalities of stamp duty the report also explores alternatives to the current system.

Real Rents and Household Formation: The Effect of the Tax Reform Act by Donald R. Haurin & Patric H. Hendershott & Dongwook Kim Borrowing Constraints and the Tenure Choice of Young Households.

Standard elements of tenure choice productivity h for housing services favors ownership eral constraint: low desire to save favors renting!discount factor, slope of income pro le matter New elements with endogenous family choice old technology (h, a) depends on tenure t & type q to save depends on type q.

Their combined citations are counted only for the first article. Borrowing constraints and the tenure choice of young households. DR Haurin, PH Hendershott, SM Wachter Wealth accumulation and housing choices of young households: An exploratory investigation.

DR Haurin, SM Wachter, PH Hendershott. good. The household borrowing constraint and its e ect on residential investment are, therefore, important for understanding the lead of residential investment over output. We nd that the severity of the borrowing constraint measured as the share of households facing such a constraint determines whether or not residential investment leads Size: KB.

Despite growing evidence that debt influences pivotal life events in early and young adulthood, the role of debt in the familial lives of young adults has received relatively little attention. Using data from the NLSY cohort (N = 6,) and a discrete-time competing risks hazard model framework, I test whether the transition to first union is influenced by a young Cited by: Households can always o⁄set any limitation of the mortgage loan (i.e., downpayment requirement) by borrowing or lending in the asset market.

Mortgage choice is meaningful in an environment with incomplete markets and with borrowing constraints.

in “wealth-constrained “ households. Several studies investigate the special role of homeownership in wealth accumulation and its relationship to tenure choice. In a series of interesting studies, Haurin, Hendershott, and Wachter (b, c) explore wealth accumulation and housing choices of young households.

Abstract: Economic theory suggests that uninsurable income risk and the expectation of future borrowing constraints can reduce the share of risky assets in a household's portfolio. If the utility function exhibits decreasing absolute risk aversion and decreasing prudence, an individual will reduce his exposure to rate-of-return risks when Cited by: holds face borrowing constraints and the precautionary saving motive is active, public debt can act as if it relaxed the household borrowing constraint.

That is, higher levels of public debt result in higher interest rates making assets more attractive to hold and, hence, enhancing households’ self-insurance Size: KB.choice with exogenous borrowing constraints, an uninsurable income risk, and a rate of return risk.

He finds that households that expect to be liquidity constrained hold less risky assets than households that do not, i.e. the effect of borrowing constraints reinforces that of in-come risk.3 The predictions that unavoidable income.

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