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Modelling the Demand for Housing over the Lifecycle

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Author Info

  • Orazio Attanasio

    (University College London)

  • Renata Bottazzi

    (University of Bologna)

  • Hamish Low

    (University of Cambridge)

  • Lars Nesheim

    (University College London)

  • Matthew Wakefield

    (University of Bologna)

Abstract

This paper models individual demand for housing over the life-cycle, and shows the implications of this behaviour for aggregate demand. Individuals delay purchasing their first home when incomes are low or uncertain. This delay is exacerbated by downpayment constraints. Higher house prices lead households to downsize, rather than to stop being home-owners. In aggregate, positive house price shocks lead to consumption booms among the old and a fall in aggregate demand for housing, whereas positive income shocks lead to consumption booms among the young and a rise in aggregate demand for housing. (Copyright: Elsevier)

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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 15 (2012)
Issue (Month): 1 (January)
Pages: 1-18

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Handle: RePEc:red:issued:10-53

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Related research

Keywords: Housing; Uncertainty; Credit constraints;

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References

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  1. Orazio Attanasio & Andrew Leicester & Matthew Wakefield, 2011. "Do House Prices Drive Consumption Growth? The Coincident Cycles Of House Prices And Consumption In The Uk," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 399-435, 06.
  2. Karen A. Kopecky & Richard M. H. Suen, 2009. "Finite State Markov-Chain Approximations to Highly Persistent Processes," Working Papers 200904, University of California at Riverside, Department of Economics, revised May 2009.
  3. Jonas D. M. Fisher & Martin Gervais, 2009. "Why has home ownership fallen among the young?," IFS Working Papers W09/08, Institute for Fiscal Studies.
  4. Tauchen, George & Hussey, Robert, 1991. "Quadrature-Based Methods for Obtaining Approximate Solutions to Nonlinear Asset Pricing Models," Econometrica, Econometric Society, vol. 59(2), pages 371-96, March.
  5. José-Víctor Ríos-Rull & Virginia Sánchez-Marcos, 2008. "An Aggregate Economy with Different Size Houses," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 705-714, 04-05.
  6. Jeffrey R. Campbell & Zvi Hercowitz, 2004. "The dynamics of work and debt," Working Paper Series WP-04-05, Federal Reserve Bank of Chicago.
  7. Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2009. "Accounting For Changes In The Homeownership Rate," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 50(3), pages 677-726, 08.
  8. Orazio P. Attanasio & Laura Blow & Robert Hamilton & Andrew Leicester, 2009. "Booms and Busts: Consumption, House Prices and Expectations," Economica, London School of Economics and Political Science, vol. 76(301), pages 20-50, 02.
  9. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
  10. Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 535-567.
  11. Renata Bottazzi & Thomas Crossley & Matthew Wakefield, 2012. "House prices and home ownership: a cohort analysis," IFS Working Papers W12/10, Institute for Fiscal Studies.
  12. Renata Bottazzi & Hamish Low & Matthew Wakefield, 2007. "Why do home owners work longer hours?," IFS Working Papers W07/10, Institute for Fiscal Studies.
  13. repec:bla:restud:v:73:y:2006:i:2:p:459-485 is not listed on IDEAS
  14. MaCurdy, Thomas E., 1982. "The use of time series processes to model the error structure of earnings in a longitudinal data analysis," Journal of Econometrics, Elsevier, vol. 18(1), pages 83-114, January.
  15. James Banks & Zoë Oldfield & Matthew Wakefield, 2002. "The distribution of financial wealth in the UK: evidence from 2000 BHPS data," IFS Working Papers W02/21, Institute for Fiscal Studies.
  16. Banks, J & Emmerson, C & Oldfield, Z & Tetlow, G, 2005. "Prepared for Retirement? The adequacy and distribution of retirement resources in England," Open Access publications from University College London http://discovery.ucl.ac.u, University College London.
  17. Richard Blundell & Luigi Pistaferri & Ian Preston, 2004. "Consumption inequality and partial insurance," IFS Working Papers W04/28, Institute for Fiscal Studies.
  18. Rui Yao, 2005. "Optimal Consumption and Portfolio Choices with Risky Housing and Borrowing Constraints," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 197-239.
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Cited by:
  1. Alan, S. & Crossley, T. & Low, H., 2012. "Saving on a Rainy Day, Borrowing for a Rainy Day," Cambridge Working Papers in Economics 1222, Faculty of Economics, University of Cambridge.

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