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Modelling the Demand for Housing over the Lifecycle

  • Orazio Attanasio

    (University College London)

  • Renata Bottazzi

    (University of Bologna)

  • Hamish Low

    (University of Cambridge)

  • Lars Nesheim

    (University College London)

  • Matthew Wakefield

    (University of Bologna)

This paper models individual demand for housing over the life-cycle, and shows the implications of this behaviour for aggregate demand. Individuals delay purchasing their first home when incomes are low or uncertain. This delay is exacerbated by downpayment constraints. Higher house prices lead households to downsize, rather than to stop being home-owners. In aggregate, positive house price shocks lead to consumption booms among the old and a fall in aggregate demand for housing, whereas positive income shocks lead to consumption booms among the young and a rise in aggregate demand for housing. (Copyright: Elsevier)

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Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 15 (2012)
Issue (Month): 1 (January)
Pages: 1-18

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Handle: RePEc:red:issued:10-53
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  1. Jeffrey R. Campbell & Zvi Hercowitz, 2004. "The Dynamics of Work and Debt," NBER Working Papers 10201, National Bureau of Economic Research, Inc.
  2. Orazio Attanasio & Laura Blow & Robert Hamilton & Andrew Leicester, 2005. "Booms and busts: consumption, house prices and expectations," IFS Working Papers W05/24, Institute for Fiscal Studies.
  3. James Banks & Sarah Smith, 2006. "Retirement in the UK," Oxford Review of Economic Policy, Oxford University Press, vol. 22(1), pages 40-56, Spring.
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  5. Sven Rady & François Ortalo-Magné, 2001. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints," CESifo Working Paper Series 470, CESifo Group Munich.
  6. Jonas D. M. Fisher & Martin Gervais, 2011. "Why Has Home Ownership Fallen Among The Young?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 883-912, 08.
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  8. Orazio Attanasio & Andrew Leicester & Matthew Wakefield, 2011. "Do House Prices Drive Consumption Growth? The Coincident Cycles Of House Prices And Consumption In The Uk," Journal of the European Economic Association, European Economic Association, vol. 9(3), pages 399-435, 06.
  9. Kopecky, Karen A. & Suen, Richard M. H., 2009. "Finite State Markov-Chain Approximations to Highly Persistent Processes," MPRA Paper 15122, University Library of Munich, Germany.
  10. Yoshiro Miwa & Matthew Chambers & Carlos Garriga & Don E. Schlagenhauf, 2004. "Accounting for Changes in the Homeownership Rate," CIRJE F-Series CIRJE-F-312, CIRJE, Faculty of Economics, University of Tokyo.
  11. Tauchen, George, 1986. "Finite state markov-chain approximations to univariate and vector autoregressions," Economics Letters, Elsevier, vol. 20(2), pages 177-181.
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  14. Joao F. Cocco, 2005. "Portfolio Choice in the Presence of Housing," Review of Financial Studies, Society for Financial Studies, vol. 18(2), pages 535-567.
  15. James Banks & Zoë Oldfield & Matthew Wakefield, 2002. "The distribution of financial wealth in the UK: evidence from 2000 BHPS data," IFS Working Papers W02/21, Institute for Fiscal Studies.
  16. Rui Yao, 2005. "Optimal Consumption and Portfolio Choices with Risky Housing and Borrowing Constraints," Review of Financial Studies, Society for Financial Studies, vol. 18(1), pages 197-239.
  17. José-Víctor Ríos-Rull & Virginia Sánchez-Marcos, 2008. "An Aggregate Economy with Different Size Houses," Journal of the European Economic Association, MIT Press, vol. 6(2-3), pages 705-714, 04-05.
  18. R. Bottazzi & T. Crossley & M. Wakefield, 2011. "House Prices and Home Ownership: a Cohort Analysis," Working Papers wp790, Dipartimento Scienze Economiche, Universita' di Bologna.
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