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Inflation, Taxes, and the Demand For Housing

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  • Thomas P. Boehm
  • Joseph A. McKenzie

Abstract

Inflation affects homeownership and housing adversely through the “real‐payment tilt” of the conventional mortgage. Expectations of additional housing price appreciation, however, may induce households to invest in housing. This paper uses household data to estimate the demand for homeownership and housing, and it takes explicit notice of expectations of housing price appreciation. The results indicate for each 1% increase in the inflation rate that the conditional probability of purchase falls by 3%. Interest rate effects outweigh appreciation and tax effects. Given the decision to purchase, housing appreciation expectations do not have large effects on the amount purchased.

Suggested Citation

  • Thomas P. Boehm & Joseph A. McKenzie, 1982. "Inflation, Taxes, and the Demand For Housing," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 10(1), pages 25-38, March.
    • Handle: RePEc:bla:reesec:v:10:y:1982:i:1:p:25-38
    DOI: 10.1111/1540-6229.00256
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    References listed on IDEAS

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    1. Gillingham, Robert & Hagemann, Robert, 1983. "Cross-sectional estimation of a simultaneous model of tenure choice and housing services demand," Journal of Urban Economics, Elsevier, vol. 14(1), pages 16-39, July.
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    Cited by:

    1. Isaac F. Megbolugbe & Peter D. Linneman, 1993. "Home Ownership," Urban Studies, Urban Studies Journal Limited, vol. 30(4-5), pages 659-682, May.
    2. Peter D. Linneman & Isaac F. Megbolugbe, 1992. "Housing Affordability: Myth or Reality?," Urban Studies, Urban Studies Journal Limited, vol. 29(3-4), pages 369-392, May.
    3. Thomas K. Rudel & Alan Neaigus, 1984. "Inflation, New Homeowners and Downgrading in the 1970s," Urban Studies, Urban Studies Journal Limited, vol. 21(2), pages 129-138, May.

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