Mortgage Market Maturity and Homeownership Inequality among Young Households: A Five-Country Perspective
AbstractThis paper uses the newly constructed Luxembourg Wealth Study data to document cross-country variation in homeownership rates and the homeownership-income inequality among young households in Finland, Germany, Italy, the UK and the US, and relate it to cross-country differences in mortgage market maturity. We find that aside from Italy, homeownership rates and inequality in the four countries correspond to their mortgage take up rates and its distribution across income, reflecting the different degree of development of their respective mortgage markets. In Italy, alternative ways of financing, such as family transfers, substitute the limited mortgage availability and explains the second highest homeownership rate in our sample, despite the lowest mortgage take up. The mortgage market in the UK is the most open and the most equal, which leads to the highest and most equally distributed homeownership in this country as well. The mortgage market in Germany is on the other side of the spectrum with very low mortgage take-up rates and strong dependence of homeownership and mortgage take up on household income. Finland and the US are in-between. Counterfactual predictions suggest that although household characteristics play some role in explaining the variation in home ownership rates across the five countries, it is mostly the country specific effects of these characteristics determined by the institutional environment as well as the functioning of the housing and mortgage markets that drive the main result.
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Bibliographic InfoPaper provided by DIW Berlin, The German Socio-Economic Panel (SOEP) in its series SOEPpapers on Multidisciplinary Panel Data Research with number 90.
Length: 58 p.
Date of creation: 2008
Date of revision:
Homeownership; credit constraints; mortgage market;
Other versions of this item:
- Alena Bicakova & Eva Sierminska, 2008. "Mortgage Market Maturity and Homeownership Inequality among Young Households: A Five-Country Perspective," Discussion Papers of DIW Berlin 778, DIW Berlin, German Institute for Economic Research.
- D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
- D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
- G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
- R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-03-01 (All new papers)
- NEP-EEC-2008-03-01 (European Economics)
- NEP-URE-2008-03-01 (Urban & Real Estate Economics)
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