Does Investment Risk Affect the Housing Decisions of Families?
Households assume substantial house-price risk when purchasing a home. This article investigates the effect of such risk on families' housing decisions. Using a repeat cross-section of household data from the American Housing Survey spanning a 10-year period and measures of expected return and time-varying risk, I find that families are less likely to own and housing demand is reduced during episodes of relatively high, anticipated house-price volatility. The impact is greater on low- and moderate-income families and first-time homeowners than other groups. The results hold implications for policies designed to assist homeowners in lessening the risk they bear. (JEL R21, D12, D84) Copyright 2003, Oxford University Press.
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Volume (Year): 41 (2003)
Issue (Month): 4 (October)
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