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Gifts, down payments, and housing affordability

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  • Christopher J. Mayer
  • Gary V. Engelhardt

Abstract

Recent evidence shows that homeownership rates among young households have declined substantially since the mid 1980s. Although factors such as late household formation and the increasing user cost of housing are contributing factors, reduced affordability is also a concern. Aggregate data indicate that first-time buyers are relying more heavily on gifts from relatives and less on own savings in accumulating the down payment. ; This paper explores the role of gifts in helping first-time buyers purchase a home using data from two different sources: surveys of recent home buyers in 18 cities between 1988 and 1993, and 1990 Boston loan applicants. The evidence shows that financial constraints are important in explaining the increased reliance on gifts, with the receipt of a gift being negatively related to income and wealth, and positively related to the one-year rate of appreciation of house prices. The evidence is mixed as to whether givers target gifts to certain types of households, such as young, married couples.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Boston in its series Working Papers with number 94-5.

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Date of creation: 1994
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Publication status: Published in Journal of Housing Research (Summer 1996).
Handle: RePEc:fip:fedbwp:94-5

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Keywords: Housing - Finance ; Mortgages;

References

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  1. W. G. Gale & J. K. Scholz, . "Intergenerational transfers and the accumulation of wealth," Institute for Research on Poverty Discussion Papers 1019-93, University of Wisconsin Institute for Research on Poverty.
  2. Richard K. Green, 1995. "Should the Stagnant Homeownership Rate be a Source of Concern?," NBER Working Papers 5176, National Bureau of Economic Research, Inc.
  3. Peter M. Zorn, 1989. "Mobility-Tenure Decisions and Financial Credit: Do Mortgage Qualification Requirements Constrain Homeownership?," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 1-16.
  4. Kotlikoff, Laurence J, 1988. "Intergenerational Transfers and Savings," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 41-58, Spring.
  5. Sheiner Louise, 1995. "Housing Prices and the Savings of Renters," Journal of Urban Economics, Elsevier, vol. 38(1), pages 94-125, July.
  6. Alicia H. Munnell, 1992. "Mortgage lending in Boston: interpreting HMDA data," Working Papers 92-7, Federal Reserve Bank of Boston.
  7. Cox, Donald, 1987. "Motives for Private Income Transfers," Journal of Political Economy, University of Chicago Press, vol. 95(3), pages 508-46, June.
  8. Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402.
  9. Gary V. Engelhardt & Christopher J. Mayer, 1994. "Gifts for home purchase and housing market behavior," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 47-58.
  10. Brueckner, Jan K & Follain, James R, 1988. "The Rise and Fall of the ARM: An Econometric Analysis of Mortgage Choice," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 93-102, February.
  11. Cox, Donald & Jappelli, Tullio, 1990. "Credit Rationing and Private Transfers: Evidence from Survey Data," The Review of Economics and Statistics, MIT Press, vol. 72(3), pages 445-54, August.
  12. Guiso, Luigi & Jappelli, Tullio, 1991. "Intergenerational transfers and capital market imperfections : Evidence from a cross-section of Italian households," European Economic Review, Elsevier, vol. 35(1), pages 103-120, January.
  13. Ohtake, F. & Horioka, C.Y., 1995. "Saving Motives in Japan," ISER Discussion Paper 0392, Institute of Social and Economic Research, Osaka University.
  14. Modigliani, Franco, 1988. "The Role of Intergenerational Transfers and Life Cycle Saving in the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 2(2), pages 15-40, Spring.
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Cited by:
  1. Luci Ellis, 2008. "The housing meltdown: Why did it happen in the United States?," BIS Working Papers 259, Bank for International Settlements.
  2. Del Boca, Daniela & Lusardi, Annamaria, 2002. "Credit Market Constraints and Labor Market Decisions," IZA Discussion Papers 598, Institute for the Study of Labor (IZA).
  3. Daniela Del Boca, 2002. "The effect of child care and part time opportunities on participation and fertility decisions in Italy," Journal of Population Economics, Springer, vol. 15(3), pages 549-573.
  4. Francois-Charles Wolff & Seymour Spilerman & Claudine Attias-Donfut, 2005. "Do Parents Help More their Less Well-Off Children? Evidence from a Sample of Migrants to France," Microeconomics 0504001, EconWPA.

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