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Gifts, down payments, and housing affordability

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  • Gary V. Engelhardt
  • Christopher J. Mayer

Abstract

Recent evidence shows that homeownership rates among young households have declined substantially since the mid 1980s. Although factors such as late household formation and the increasing user cost of housing are contributing factors, reduced affordability is also a concern. Aggregate data indicate that first-time buyers are relying more heavily on gifts from relatives and less on own savings in accumulating the down payment. ; This paper explores the role of gifts in helping first-time buyers purchase a home using data from two different sources: surveys of recent home buyers in 18 cities between 1988 and 1993, and 1990 Boston loan applicants. The evidence shows that financial constraints are important in explaining the increased reliance on gifts, with the receipt of a gift being negatively related to income and wealth, and positively related to the one-year rate of appreciation of house prices. The evidence is mixed as to whether givers target gifts to certain types of households, such as young, married couples.

Suggested Citation

  • Gary V. Engelhardt & Christopher J. Mayer, 1994. "Gifts, down payments, and housing affordability," Working Papers 94-5, Federal Reserve Bank of Boston.
  • Handle: RePEc:fip:fedbwp:94-5
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    Cited by:

    1. Francois-Charles Wolff & Seymour Spilerman & Claudine Attias-Donfut, 2005. "Do Parents Help More their Less Well-Off Children? Evidence from a Sample of Migrants to France," Microeconomics 0504001, University Library of Munich, Germany.
    2. Engelhardt, Gary V. & Mayer, Christopher J., 1998. "Intergenerational Transfers, Borrowing Constraints, and Saving Behavior: Evidence from the Housing Market," Journal of Urban Economics, Elsevier, vol. 44(1), pages 135-157, July.
    3. Luci Ellis, 2010. "The Housing Meltdown: Why Did It Happen in the United States?," International Real Estate Review, Global Social Science Institute, vol. 13(3), pages 351-394.
    4. Del Boca, Daniela & Lusardi, Annamaria, 2003. "Credit market constraints and labor market decisions," Labour Economics, Elsevier, vol. 10(6), pages 681-703, December.
    5. Daniela Del Boca, 2002. "The effect of child care and part time opportunities on participation and fertility decisions in Italy," Journal of Population Economics, Springer;European Society for Population Economics, vol. 15(3), pages 549-573.

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    Keywords

    Housing - Finance; Mortgages;

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