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Housing Formation and Unemployment Rates: Evidence from 1975–2011

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  • Jung Choi
  • Gary Painter

Abstract

This paper investigates the impact of shocks in the unemployment rate on household formation. Prior research has shown that negative economic shocks reduce household formation, but does not inform how long the declines in household formation will persist. Using time series data from 1975 to 2011, we examine how households respond to unemployment rate shocks and estimate the length of time it takes for households to return to its original level in a vector autoregressive model. The results demonstrate that household formation falls in the quarter after unemployment increases, and that it can take up to 10 quarters to return its previous level. While this is a substantial length of time, one implication of these results is that even a permanent increase in the unemployment rate will not permanently affect housing formation in the long run. Copyright Springer Science+Business Media New York 2015

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  • Jung Choi & Gary Painter, 2015. "Housing Formation and Unemployment Rates: Evidence from 1975–2011," The Journal of Real Estate Finance and Economics, Springer, vol. 50(4), pages 549-566, May.
    • Handle: RePEc:kap:jrefec:v:50:y:2015:i:4:p:549-566
    DOI: 10.1007/s11146-014-9487-7
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    References listed on IDEAS

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    Cited by:

    1. Chan, Sewin & O'Regan, Katherine & You, Wei, 2021. "Migration choices of the boomerang generation: Does returning home dampen labor market adjustment?," Journal of Housing Economics, Elsevier, vol. 53(C).

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