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What are the Perceived Barriers to Homeownership for Young Adults?

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Listed:
  • Larrimore, Jeff
  • Schuetz, Jenny
  • Dodini, Samuel

Abstract

As the U.S. emerges from the Great Recession, there is concern about slowing rates of new household formation and declining interest in homeownership, especially among younger households. Potential reasons that have been posited include tight mortgage credit and housing supply, changing preferences over tenure in the wake of the foreclosure crisis, and weak labor markets for young workers. In this paper, we examine how individual housing choices, and the stated motivations for these choices, reflect local housing affordability and individual financial circumstances, focusing particularly on young households. The analysis makes use of new individual-level data from the Survey of Household Economics and Decisionmaking (SHED). We find that housing affordability is correlated with county-level tenure rates and individual-level probability of homeownership for households with heads under age 40. However, it appears that young households' perceived barriers to homeownership are more closely related to individual financial circumstances than local housing market conditions.

Suggested Citation

  • Larrimore, Jeff & Schuetz, Jenny & Dodini, Samuel, 2016. "What are the Perceived Barriers to Homeownership for Young Adults?," Finance and Economics Discussion Series 2016-021, Board of Governors of the Federal Reserve System (U.S.).
  • Handle: RePEc:fip:fedgfe:2016-21
    DOI: 10.17016/FEDS.2016.021
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    File URL: http://www.federalreserve.gov/econresdata/feds/2016/files/2016021pap.pdf
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    File URL: http://dx.doi.org/10.17016/FEDS.2016.021
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    References listed on IDEAS

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    2. DiPasquale Denise & Wheaton William C., 1994. "Housing Market Dynamics and the Future of Housing Prices," Journal of Urban Economics, Elsevier, vol. 35(1), pages 1-27, January.
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    4. Raven Molloy & Hui Shan, 2013. "The Postforeclosure Experience of U.S. Households," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 41(2), pages 225-254, June.
    5. Donald R. Haurin & Susan M. Wachter & Patric H. Hendershott, 1995. "Wealth Accumulation and Housing Choices of Young Households: An Exploratory Investigation," NBER Working Papers 5070, National Bureau of Economic Research, Inc.
    6. Haurin, Donald R & Hendershott, Patric H & Kim, Dongwook, 1993. "The Impact of Real Rents and Wages on Household Formation," The Review of Economics and Statistics, MIT Press, vol. 75(2), pages 284-293, May.
    7. Rogers, William H. & Winkler, Anne E., 2014. "How Did the Housing and Labor Market Crises Affect Young Adults' Living Arrangements?," IZA Discussion Papers 8568, Institute for the Study of Labor (IZA).
    8. Dettling, Lisa J. & Hsu, Joanne W., 2014. "Returning to the Nest: Debt and Parental Co-residence Among Young Adults," Finance and Economics Discussion Series 2014-80, Board of Governors of the Federal Reserve System (U.S.).
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    11. Leslie Whittington & H. Elizabeth Peters, 1996. "Economic incentives for financial and residential independence," Demography, Springer;Population Association of America (PAA), vol. 33(1), pages 82-97, February.
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    Cited by:

    1. John Simon & Tahlee Stone, 2017. "The Property Ladder after the Financial Crisis: The First Step is a Stretch but Those Who Make It Are Doing OK," RBA Research Discussion Papers rdp2017-05, Reserve Bank of Australia.

    More about this item

    Keywords

    Housing demand; consumer preferences; household formation; tenure choice;

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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