Advanced Search
MyIDEAS: Login

The Policy Implications of Portfolio Choice in Underserved Mortgage Markets

Contents:

Author Info

  • William Goetzmann
  • Matthew Spiegel

Abstract

Home ownership increases the incentive to maintain property and neighborhood, as well as decreasing the outflow of rents from low-income zones. However, these benefits are not costless to homeowners. With a mortgage comes the possibility of default, the financial demands of maintenance, a reduction in alternate investment opportunities, an increased exposure to fluctuations in local economic conditions, and a drastic reduction in the liquidity of personal wealth. Recently, policy makers have sought to increase mortgage lending in traditionally underserved markets. In this paper we consider the effects of this policy in light of the risk and return of housing and the current tax treatment of the home mortgage deduction. We find housing to be a relatively poor asset class in which to invest the bulk of family wealth. Trends in housing suggest that a large percentage of homeowners who bought and sold within a five year horizon in the United States over the last twenty years lost money on the investment. Lowering the equity required to purchase a home does little to alleviate the problem. We show that the current tax code - if anything - encourages renting over buying and gentrifica

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://icfpub.som.yale.edu/publications/2618
Download Restriction: no

Bibliographic Info

Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number ysm161.

as in new window
Length:
Date of creation: 01 Nov 2000
Date of revision: 01 Mar 2001
Handle: RePEc:ysm:somwrk:ysm161

Contact details of provider:
Web page: http://icf.som.yale.edu/
More information through EDIRC

Related research

Keywords:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Goetzmann, William Nelson, 1993. "The Single Family Home in the Investment Portfolio," The Journal of Real Estate Finance and Economics, Springer, vol. 6(3), pages 201-22, May.
  2. William N. Goetzmann & Brent W. Ambrose, 1996. "Risks and Incentives in Underserved Mortgage Markets," Yale School of Management Working Papers ysm62, Yale School of Management.
  3. Brueckner, Jan K, 1997. "Consumption and Investment Motives and the Portfolio Choices of Homeowners," The Journal of Real Estate Finance and Economics, Springer, vol. 15(2), pages 159-80, October.
  4. Goetzmann, W.N. & Spiegel, M., 1992. "Non-temporal Components of Residential Real Estate Appreciation," Papers 92-20, Columbia - Graduate School of Business.
  5. Goetzmann, William N & Spiegel, Matthew, 1997. "A Spatial Model of Housing Returns and Neighborhood Substitutability," The Journal of Real Estate Finance and Economics, Springer, vol. 14(1-2), pages 11-31, Jan.-Marc.
  6. Theodore M. Crone & Richard P. Voith, 1999. "Risk and Return within the Single-Family Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(1), pages 63-78.
  7. Robert J. Shiller & Allan N. Weiss, 2000. "Moral Hazard in Home Equity Conversion," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 28(1), pages 1-31.
  8. Owen Lamont & Jeremy C. Stein, 1997. "Leverage and House-Price Dynamics in U.S. Cities," NBER Working Papers 5961, National Bureau of Economic Research, Inc.
  9. Spiegel, Matthew & Strange, William, 1992. "A Theory of Predictable Excess Returns in Real Estate," The Journal of Real Estate Finance and Economics, Springer, vol. 5(4), pages 375-92, December.
  10. Caplin, Andrew & Freeman, Charles & Tracy, Joseph, 1997. "Collateral Damage: Refinancing Constraints and Regional Recessions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 29(4), pages 496-516, November.
  11. Ling, David C. & McGill, Gary A., 1998. "Evidence on the Demand for Mortgage Debt by Owner-Occupants," Journal of Urban Economics, Elsevier, vol. 44(3), pages 391-414, November.
  12. Donald R. Haurin & Patric H. Hendershott & Susan M. Wachter, 1996. "Borrowing Constraints and the Tenure Choice of Young Households," NBER Working Papers 5630, National Bureau of Economic Research, Inc.
  13. Gyourko, Joseph & Linneman, Peter, 1996. "Analysis of the Changing Influences on Traditional Households' Ownership Patterns," Journal of Urban Economics, Elsevier, vol. 39(3), pages 318-341, May.
  14. James M. Poterba, 1983. "Tax Subsidies to Owner-occupied Housing: An Asset Market Approach," Working papers 339, Massachusetts Institute of Technology (MIT), Department of Economics.
  15. Goetzmann, William Nelson, 1992. "The Accuracy of Real Estate Indices: Repeat Sale Estimators," The Journal of Real Estate Finance and Economics, Springer, vol. 5(1), pages 5-53, March.
  16. Fratantoni, Michael C., 1998. "Homeownership and Investment in Risky Assets," Journal of Urban Economics, Elsevier, vol. 44(1), pages 27-42, July.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Cho, Sang-Wook (Stanley), 2012. "Accounting For Life-Cycle Wealth Accumulation: The Role Of Housing Institution," Macroeconomic Dynamics, Cambridge University Press, vol. 16(04), pages 493-517, September.
  2. Claudio Campanale, 2005. "Increasing Returns To Savings And Wealth Inequality," Working Papers. Serie AD 2005-20, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
  3. Jiro Yoshida, 2008. "Technology Shocks and Asset Price Dynamics:The Role of Housing in General Equilibrium," CARF F-Series CARF-F-119, Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo.
  4. Antonia Díaz & Maria J. Luengo-Prado, 2006. "On The User Cost and Homeownership," Working Papers 2006-14, FEDEA.
  5. Wenli Li & Rui Yao, 2005. "The life-cycle effects of house price changes," Working Papers 05-7, Federal Reserve Bank of Philadelphia.
  6. Sang-Wook Stanley Cho, 2007. "Household Wealth Accumulation and Portfolio Choices in Korea," Discussion Papers 2007-26, School of Economics, The University of New South Wales.
  7. Olivia S. Mitchell & John Piggott, 2004. "Unlocking Housing Equity in Japan," NBER Working Papers 10340, National Bureau of Economic Research, Inc.
  8. Wenli Li & Fang Yang, 2010. "American dream or American obsession? The economic benefits and costs of homeownership," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 20-30.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:ysm:somwrk:ysm161. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.