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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. Copyright American Real Estate and Urban Economics Association.

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.
  • Handle: RePEc:bla:reesec:v:17:y:1989:i:4:p:389-402
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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. Linneman, Peter, 1981. "The demand for residence site characteristics," Journal of Urban Economics, Elsevier, vol. 9(2), pages 129-148, March.
    3. 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.
    4. 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(04), pages 769-782, November.
    5. 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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