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The Impacts of Borrowing Constraints on Homeownership

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  • Peter Linneman
  • Susan Wachter

Abstract

This paper utilizes microdata to directly quantify the impact of mortgage underwriting criteria on individual homeownership propensities. To determine whether a family is constrained by these criteria, the optimal home purchase price is estimated. The results indicate that wealth and income constraints both reduce homeownership propensities, with a stronger impact for wealth constraints. Mortgage market innovations of the early 1980s seem to have reduced these effects. The research indicates, however, that even in well‐developed capital markets, the presence of borrowing constraints adversely affects homeownership propensities.

Suggested Citation

  • 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, December.
    • Handle: RePEc:bla:reesec:v:17:y:1989:i:4:p:389-402
    DOI: 10.1111/1540-6229.00499
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    References listed on IDEAS

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    1. Linneman, Peter, 1985. "An economic analysis of the homeownership decision," Journal of Urban Economics, Elsevier, vol. 17(2), pages 230-246, March.
    2. 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.
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    4. Goodman, Allen C. & Kawai, Masahiro, 1986. "Functional form, sample selection, and housing demand," Journal of Urban Economics, Elsevier, vol. 20(2), pages 155-167, September.
    5. Follain, James R., 1979. "A Study of the Demand for Housing by Low Versus High Income Households," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 14(4), pages 769-782, November.
    6. Goodman, Allen C. & Kawai, Masahiro, 1982. "Permanent income, hedonic prices, and demand for housing: New evidence," Journal of Urban Economics, Elsevier, vol. 12(2), pages 214-237, September.
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