Boom In, Bust Out: Young Households and the Housing Price Cycle
The UK experienced a major residential real estate boom-bust cycle from the mid-Eighties to the mid-Nineties, accompanied by unprecedented shifts in the owner occupancy rate of young households. Previous empirical analyses have pointed toward income changes and financial deregulation as the likely causes of this episode, with little to say about the differential effects on various age groups. We show that, in a life-cycle model with income heterogeneity and credit constraints, the observed co-movements of housing prices and owner occupancy rates can be explained as an equilibrium response to income and credit market shocks. Our findings suggest that the financial liberalisation of the early Eighties was crucial for the unparalleled increase in the owner occupancy rate of young households during the boom.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Francois Ortalo-Magne & Sven Rady, 1998.
"Housing Market Fluctuations in a Life-Cycle Economy with Credit Constraints,"
- Sven Rady, 1998. "Housing Market Fluctuations in a Life-Cycle Economy with Credit Constraints," FMG Discussion Papers dp296, Financial Markets Group.
- Muellbauer, John & Murphy, Anthony, 1997.
"Booms and Busts in the UK Housing Market,"
CEPR Discussion Papers
1615, C.E.P.R. Discussion Papers.
When requesting a correction, please mention this item's handle: RePEc:fmg:fmgdps:dp310. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (The FMG Administration)
If references are entirely missing, you can add them using this form.