Does Investment Risk Affect the Housing Decisions of Families?

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Does Investment Risk Affect the Housing Decisions of Families?

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Tracy M. Turner

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Tracy Margo Turner

Abstract

Households assume substantial house-price risk when purchasing a home. This article investigates the effect of such risk on families' housing decisions. Using a repeat cross-section of household data from the American Housing Survey spanning a 10-year period and measures of expected return and time-varying risk, I find that families are less likely to own and housing demand is reduced during episodes of relatively high, anticipated house-price volatility. The impact is greater on low- and moderate-income families and first-time homeowners than other groups. The results hold implications for policies designed to assist homeowners in lessening the risk they bear. (JEL R21, D12, D84) Copyright 2003, Oxford University Press.

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Publisher Info
Article provided by Oxford University Press in its journal Economic Inquiry.

Volume (Year): 41 (2003)
Issue (Month): 4 (October)
Pages: 675-691
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Handle: RePEc:oup:ecinqu:v:41:y:2003:i:4:p:675-691

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Find related papers by JEL classification:
R21 - Urban, Rural, and Regional Economics - - Household Analysis - - - Housing Demand
D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

Kendra N. McLeish & Robert J. Oxoby, 2007. "Gender, Affect and Intertemporal Consistency: An Experimental Approach," IZA Discussion Papers 2663, Institute for the Study of Labor (IZA). [Downloadable!]
Peter Englund & Min Hwang & John Quigley, 2006. "Hedging Housing Risk," Berkeley Program on Housing and Urban Policy, Working Paper Series 1018, Berkeley Program on Housing and Urban Policy. [Downloadable!]
Other versions:
- Peter ENGLUND & Min HWANG & John M. QUIGLEY, 2000. "Hedging Housing Risk," FAME Research Paper Series rp26, International Center for Financial Asset Management and Engineering. [Downloadable!]
- Englund, Peter & Hwang, Min & Quigley, John M., 2001. "Hedging Housing Risk," SIFR Research Report Series 2, Institute for Financial Research. [Downloadable!]
- Englund, Peter & Hwang, Min & Quigley, John M, 2002. "Hedging Housing Risk," The Journal of Real Estate Finance and Economics, Springer, vol. 24(1-2), pages 167-200, Jan.-Marc. [Downloadable!] (restricted)
Hilber, Christian A. L. & Liu, Yingchun, 2007. "Explaining the Black-White Homeownership Gap: The Role of Own Wealth, Parental Externalities and Locational Preferences," MPRA Paper 5136, University Library of Munich, Germany. [Downloadable!]
Other versions:
- Hilber, Christian A.L. & Liu, Yingchun, 2008. "Explaining the black-white homeownership gap: The role of own wealth, parental externalities and locational preferences," Journal of Housing Economics, Elsevier, vol. 17(2), pages 152-174, June. [Downloadable!] (restricted)

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