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House Prices and Risk Sharing

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  • Hryshko, Dmytro
  • Luengo-Prado, Maria Jose
  • Sorensen, Bent E

Abstract

Using data from the Panel Study of Income Dynamics, we show that homeowners are able to maintain a high level of consumption following job loss (or disability) in periods of rising local house prices while the consumption drop for homeowners who lose their job in times of lower house prices is substantial. The results are consistent with homeowners being able to access wealth gains when housing appreciates as witnessed by their ability to smooth consumption more than renters. We calibrate and simulate a model of endogenous homeownership and consumption which is able to reproduce the patterns in the data quite well.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7894.

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Date of creation: Jun 2010
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Handle: RePEc:cpr:ceprdp:7894

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Related research

Keywords: consumption smoothing; PSID; regional house prices;

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References

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  1. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
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  5. Richard Blundell & Luigi Pistaferri & Ian Preston, 2004. "Consumption inequality and partial insurance," IFS Working Papers W04/28, Institute for Fiscal Studies.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Houses are a poor way to share risk
    by Economic Logician in Economic Logic on 2009-11-02 15:26:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Andrew Paciorek & Todd M. Sinai, 2010. "Does Home Owning Smooth the Variability of Future Housing Consumption?," NBER Working Papers 16531, National Bureau of Economic Research, Inc.
  2. Christelis, Dimitris & Georgarakos, Dimitris & Jappelli, Tullio, 2011. "Wealth shocks, unemployment shocks and consumption in the wake of the Great Recession," CFS Working Paper Series 2011/27, Center for Financial Studies (CFS).
  3. Daniel Cooper & María José Luengo-Prado, 2011. "House price growth when kids are teenagers: a path to higher intergenerational achievement?," Working Papers 11-6, Federal Reserve Bank of Boston.
  4. Almudena Sevilla Sanz & Annalisa Cristini, 2011. "Do House Prices Affect Consumption? A Comparison Exercise," Economics Series Working Papers 589, University of Oxford, Department of Economics.
  5. Punzi, Maria Teresa, 2012. "Housing market and current account imbalances in the international economy," Research Discussion Papers 1/2012, Bank of Finland.
  6. Cristini, Annalisa & Sevilla, Almudena, 2013. "Do House Prices Affect Consumption? A Re-assessment of the Wealth Hypothesis," IZA Discussion Papers 7576, Institute for the Study of Labor (IZA).
  7. Rodolfo G. Campos & Iliana Reggio, 2013. "Measurement error in imputation procedures," Banco de Espa�a Working Papers 1322, Banco de Espa�a.
  8. Partridge, Mark D. & Rickman, Dan S. & Olfert, M. Rose & Ali, Kamar, 2012. "Dwindling U.S. internal migration: Evidence of spatial equilibrium or structural shifts in local labor markets?," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 375-388.
  9. Jonathan Halket & Michael Amior, 2012. "Do Households Use Homeownership To Insure Themselves? Evidence Across U.S. Cities," Economics Discussion Papers 718, University of Essex, Department of Economics.

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