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Homeowners’ financial vulnerability over the house price cycle

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  • Ruben Tarneemail

Abstract

This paper investigates the financial vulnerability dynamics of indebted homeowners over the housing cycle using an agent-based housing market model, calibrated with UK microdata. The findings suggest that financial vulnerability is primarily driven by house purchases and dissaving due to a wealth effect on consumption. The former is more important during house price upswings, while the latter becomes significant at high price levels. Additionally, current vulnerability is path-dependent on previous purchases at high prices, as these purchases, due to a wealth effect, result in temporarily elevated consumption and consequently reduced financial buffers.

Suggested Citation

  • Ruben Tarneemail, 2025. "Homeowners’ financial vulnerability over the house price cycle," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 34(2), pages 289-317.
    • Handle: RePEc:oup:indcch:v:34:y:2025:i:2:p:289-317.
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    File URL: http://hdl.handle.net/10.1093/icc/dtae031
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