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How credit markets affect homeownership: an explanation based on differences between Italian regions

  • Serena Trucchi

    ()

    (University of Bologna and CeRP-Collegio Carlo Alberto)

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    This paper deals with the importance of liquidity constraints in shaping one of the main consumption and investment choices house- holds make in their life: the purchase of a house. When borrowing and lending rates di er from each other and from the implicit rate of interest paid by real estate, the structure of those rates inuences the decision to buy a house, and its impact depends on household charac- teristics and, in particular, on the slope of their resources pro le over time. The empirical analysis is based on the Bank of Italy's Survey on Household Income and Wealth and exploits regional heterogeneity in nancial market conditions to assess their e ect on household tenure in a single country setting. The results show strong evidence that the interest rate spread interacts with the time path of resources and alters the desired age pro le of housing tenure by discouraging or postponing the dwelling purchase by households with steeper resource pro les.

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    File URL: http://fileserver.carloalberto.org/cerp/WP_122.pdf
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    Paper provided by Center for Research on Pensions and Welfare Policies, Turin (Italy) in its series CeRP Working Papers with number 122.

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    Length: 43 pages
    Date of creation: 2011
    Date of revision:
    Handle: RePEc:crp:wpaper:122
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    Web page: http://www.cerp.carloalberto.org
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