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Housing Price Volatility and Downsizing in Later Life

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  • James Banks
  • Richard Blundell
  • Zoë Oldfield
  • James P. Smith

Abstract

In this paper, we modeled several types of housing transitions of the elderly in two countries -- Britain and the United States. One important form of these transitions involves downsizing of housing consumption, the importance of which among older households is still debated. This downsizing takes multiple forms, including reductions in the number of rooms per dwelling and the value of the home. There is also evidence that this downsizing is greater when house price volatility is greater and that American households try to escape housing price volatility by moving to places that are experience significantly less housing price volatility. Our comparative evidence in suggests that there is less evidence of downsizing in Britain. Our results indicate that housing consumption appears to decline with age in the US, even after controlling for the other demographic and work transitions associated with age that would normally produce such a decline. No such fall in housing consumption is found in Britain, largely because British households are much more likely to stay in their original residence.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13496.

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Date of creation: Oct 2007
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Publication status: published as Housing Price Volatility and Downsizing in Later Life , James Banks, Richard Blundell, Zoë Oldfield, James P. Smith. in Research Findings in the Economics of Aging , Wise. 2010
Handle: RePEc:nbr:nberwo:13496

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  1. Engelhardt, Gary V., 1996. "House prices and home owner saving behavior," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 26(3-4), pages 313-336, June.
  2. John Y. Campbell & Joao F. Cocco, 2004. "How Do House Prices Affect Consumption? Evidence From Micro F. Data," Harvard Institute of Economic Research Working Papers, Harvard - Institute of Economic Research 2045, Harvard - Institute of Economic Research.
  3. Ortalo-Magné, François & Rady, Sven, 2001. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," CEPR Discussion Papers, C.E.P.R. Discussion Papers 3015, C.E.P.R. Discussion Papers.
  4. Todd Sinai & Nicholas S. Souleles, 2005. "Owner-occupied housing as a hedge against rent risk," Working Papers 05-10, Federal Reserve Bank of Philadelphia.
  5. Steven F. Venti & David A. Wise, 2004. "Aging and Housing Equity: Another Look," NBER Chapters, in: Perspectives on the Economics of Aging, pages 127-180 National Bureau of Economic Research, Inc.
  6. James Banks & Richard Blundell & James P. Smith, 2000. "Wealth inequality in the United States and Great Britain," IFS Working Papers, Institute for Fiscal Studies W00/20, Institute for Fiscal Studies.
  7. Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 18(2), pages 535-567.
  8. Ortalo-Magne, Francois & Rady, Sven, 2002. "Tenure choice and the riskiness of non-housing consumption," Journal of Housing Economics, Elsevier, Elsevier, vol. 11(3), pages 266-279, September.
  9. James Banks & Richard Blundell & James P. Smith, 2001. "Financial Wealth Inequality in the United States and Great Britain," Working Papers, RAND Corporation Publications Department 01-01, RAND Corporation Publications Department.
  10. Louise Sheiner & David N. Weil, 1992. "The Housing Wealth of the Aged," NBER Working Papers 4115, National Bureau of Economic Research, Inc.
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  1. repec:dgr:uvatin:2010114 is not listed on IDEAS
  2. James M. Poterba & Steven F. Venti & David A. Wise, 2011. "Family Status Transitions, Latent Health, and the Post-Retirement Evolution of Assets," NBER Chapters, in: Explorations in the Economics of Aging, pages 23-69 National Bureau of Economic Research, Inc.
  3. Poterba, James M. & Venti, Steven F. & Wise, David A., 2011. "The Drawdown of Personal Retirement Assets," Working Paper Series, Harvard University, John F. Kennedy School of Government rwp11-006, Harvard University, John F. Kennedy School of Government.
  4. Calvo, Esteban & Haverstick, Kelly & Zhivan, Natalia, 2009. "Determinants and Consequences of Moving Decisions for Older Homeowners," MPRA Paper 48964, University Library of Munich, Germany.
  5. Joachim Inkmann & Paula Lopes & Alexander Michaelides, 2007. "How deep is the annuity market participation puzzle?," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 24488, London School of Economics and Political Science, LSE Library.
  6. James M. Poterba & Steven F. Venti & David A. Wise, 2010. "Demographic Trends, Housing Equity, and the Financial Security of Future Retirees," NBER Chapters, in: Demography and the Economy, pages 227-287 National Bureau of Economic Research, Inc.
  7. Viola Angelini & Anne Laferrère, 2010. "Residential Mobility of the European Elderly," CESifo Working Paper Series 3280, CESifo Group Munich.
  8. Painter, Gary & Lee, KwanOk, 2009. "Housing tenure transitions of older households: Life cycle, demographic, and familial factors," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 39(6), pages 749-760, November.
  9. Jan Rouwendal & Fleur Thomese, 2010. "Homeownership and Demand for Long-Term Care," Tinbergen Institute Discussion Papers 10-114/3, Tinbergen Institute, revised 04 Jan 2011.

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