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Current Wealth and Tenure Choice


  • Lawrence D. Jones


This paper argues that a central implication of tenure transition models is that the timing of a household's initial switch to ownership is particularly dependent upon its current net worth. In contrast, permanent income, largely derived from human capital, is assumed to be the dominant component of the relevant household budget constraint in conventional tenure choice models. These contending propositions are tested using a Canadian micro database. Consistent with the tenure transition approach, current nonhuman wealth is found to have the primary budgetary role in tenure mode decisions of young households. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Lawrence D. Jones, 1989. "Current Wealth and Tenure Choice," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 17-40.
  • Handle: RePEc:bla:reesec:v:17:y:1989:i:1:p:17-40

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    References listed on IDEAS

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    Cited by:

    1. Hendershott, Patric H. & Ong, Rachel & Wood, Gavin A. & Flatau, Paul, 2009. "Marital history and home ownership: Evidence from Australia," Journal of Housing Economics, Elsevier, vol. 18(1), pages 13-24, March.
    2. Haurin, Donald R. & Gill, H. Leroy, 2002. "The Impact of Transaction Costs and the Expected Length of Stay on Homeownership," Journal of Urban Economics, Elsevier, vol. 51(3), pages 563-584, May.
    3. François Ortalo-Magné & Sven Rady, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints ," Review of Economic Studies, Oxford University Press, vol. 73(2), pages 459-485.
    4. Ron J. Feldman, 2002. "Mortgage rates, homeownership rates, and government-sponsored enterprises," Annual Report, Federal Reserve Bank of Minneapolis, pages 4-23.
    5. Francois Ortalo-Magne & Sven Rady, 1998. "Housing Market Fluctuations in a Life-Cycle Economy with Credit Constraints," Finance 9810003, EconWPA.
    6. G. Stacy Sirmans & Enrico J. Ferreira, 1995. "The Pricing of Housing and Mortgage Services for First-Time Versus Repeat Homebuyers," Journal of Real Estate Research, American Real Estate Society, vol. 10(1), pages 115-127.
    7. Gervais, Martin, 2002. "Housing taxation and capital accumulation," Journal of Monetary Economics, Elsevier, vol. 49(7), pages 1461-1489, October.
    8. Forgionne, G. A., 1996. "Forecasting army housing supply with a DSS-delivered econometric model," Omega, Elsevier, vol. 24(5), pages 561-576, October.
    9. L. Jide Iwarere & John E. Williams, 1991. "A Micro-Market Analysis of Tenure Choice Using the Logit Model," Journal of Real Estate Research, American Real Estate Society, vol. 6(3), pages 327-340.
    10. Moriizumi, Yoko, 2003. "Targeted saving by renters for housing purchase in Japan," Journal of Urban Economics, Elsevier, vol. 53(3), pages 494-509, May.
    11. Genesove, David & Mayer, Christopher J, 1997. "Equity and Time to Sale in the Real Estate Market," American Economic Review, American Economic Association, vol. 87(3), pages 255-269, June.
    12. Jeremy C. Stein, 1993. "Prices and Trading Volume in the Housing Market: A Model with Downpayment Effects," NBER Working Papers 4373, National Bureau of Economic Research, Inc.
    13. 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.
    14. William C. LaFayette & Donald R. Haurin & Patric H. Hendershott, 1995. "Endogenous Mortgage Choice, Borrowing Constraints and the Tenure Decision," NBER Working Papers 5074, National Bureau of Economic Research, Inc.
    15. Henrik Cronqvist & Florian Münkel & Stephan Siegel, 2014. "Genetics, Homeownership, and Home Location Choice," The Journal of Real Estate Finance and Economics, Springer, vol. 48(1), pages 79-111, January.
    16. Marion Kohler & Anthony Rossiter, 2005. "Property Owners in Australia: A Snapshot," RBA Research Discussion Papers rdp2005-03, Reserve Bank of Australia.
    17. Ben-Shahar, Danny, 1998. "On the Optimality of the Hybrid Tenure Mode," Journal of Housing Economics, Elsevier, vol. 7(1), pages 69-92, March.
    18. Patric H. Hendershott, 1991. "An Altered U.S. Housing Finance System: Implications for Housing," NBER Working Papers 3770, National Bureau of Economic Research, Inc.
    19. Lee, Kwan Ok & Painter, Gary, 2013. "What happens to household formation in a recession?," Journal of Urban Economics, Elsevier, vol. 76(C), pages 93-109.
    20. Joseph Gyourko & Joseph Tracy, 1999. "A look at real housing prices and incomes: some implications for housing affordability and quality," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 63-77.

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