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House prices and risk sharing

Author

Listed:
  • Dmytro Hryshko

    () (University of Alberta)

  • María José Luengo-Prado

    () (IMDEA Social Sciences)

  • Bent E. Sørensen

    () (University of Houston)

Abstract

Homeowners in the Panel Study of Income Dynamics are able to maintain a high level of consumption following job loss (or disability) in periods of rising local house prices while the consumption drop for homeowners who lose their job in times of lower house prices is substantial. These results are consistent with homeowners being able to access wealth gains when housing appreciates as witnessed by their ability to smooth consumption more than renters. A calibrated model of endogenous homeownership and consumption is able to reproduce the patterns in the data quite well and provides an interpretation of the empirical results.

Suggested Citation

  • Dmytro Hryshko & María José Luengo-Prado & Bent E. Sørensen, 2010. "House prices and risk sharing," Working Papers 2010-17, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
  • Handle: RePEc:imd:wpaper:wp2010-17
    Note: This paper is included in the IMDEA Social Sciences Working Paper Series through the Institute's Visiting Researchers Programme
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Yuliya Demyanyk & Dmytro Hryshko & María Jose Luengo-Prado & Bent E. Sørensen, 2017. "Moving to a Job: The Role of Home Equity, Debt, and Access to Credit," American Economic Journal: Macroeconomics, American Economic Association, vol. 9(2), pages 149-181, April.
    2. Demyanyk, Yuliya & Hryshko, Dmytro & Luengo-Prado, Maria Jose & Sorensen, Bent E., 2015. "The rise and fall of consumption in the '00s," Working Papers 15-12, Federal Reserve Bank of Boston.
    3. Claudio Michelacci & Hernán Ruffo, 2015. "Optimal Life Cycle Unemployment Insurance," American Economic Review, American Economic Association, vol. 105(2), pages 816-859, February.
    4. Annalisa Cristini & Almudena Sevilla, 2014. "Do House Prices Affect Consumption? A Re-assessment of the Wealth Hypothesis," Economica, London School of Economics and Political Science, vol. 81(324), pages 601-625, October.
    5. Partridge, Mark D. & Rickman, Dan S. & Olfert, M. Rose & Ali, Kamar, 2012. "Dwindling U.S. internal migration: Evidence of spatial equilibrium or structural shifts in local labor markets?," Regional Science and Urban Economics, Elsevier, vol. 42(1-2), pages 375-388.
    6. Demyanyk, Yuliya & Luengo-Prado, Maria Jose & Hryshko, Dmytro & Sorensen, Bent E., 2015. "The Rise and Fall of Consumption in the 2000s," Working Paper 1507, Federal Reserve Bank of Cleveland.
    7. Maria Teresa Punzi, 2013. "Housing Market and Current Account Imbalances in the International Economy," Review of International Economics, Wiley Blackwell, vol. 21(4), pages 601-613, September.
    8. Cooper, Daniel & Luengo-Prado, María José, 2015. "House price growth when children are teenagers: A path to higher earnings?," Journal of Urban Economics, Elsevier, vol. 86(C), pages 54-72.
    9. Darius Kulikauskas, 2015. "Measuring fundamental housing prices in the Baltic States: empirical approach," ERES eres2015_31, European Real Estate Society (ERES).
    10. repec:esx:essedp:718 is not listed on IDEAS
    11. Bouyon, Sylvain, 2014. "A Review of Policy Options for Monitoring Household Saving," ECRI Papers 9754, Centre for European Policy Studies.
    12. Christelis, Dimitris & Georgarakos, Dimitris & Jappelli, Tullio, 2015. "Wealth shocks, unemployment shocks and consumption in the wake of the Great Recession," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 21-41.
    13. Demyanyk, Yuliya & Hryshko, Dmytro & Luengo-Prado, Maria Jose & Sorensen, Bent E., 2016. "Moving to a new job: the role of home equity, debt, and access to credit," Working Papers 16-1, Federal Reserve Bank of Boston.
    14. Daniel H. Cooper & María José Luengo-Prado, 2011. "House price growth when kids are teenagers: a path to higher intergenerational achievement?," Working Papers 11-6, Federal Reserve Bank of Boston.
    15. Paciorek, Andrew & Sinai, Todd, 2012. "Does home owning smooth the variability of future housing consumption?," Journal of Urban Economics, Elsevier, vol. 71(2), pages 244-257.
    16. Campos, Rodolfo G. & Reggio, Iliana, 2014. "Measurement error in imputation procedures," Economics Letters, Elsevier, vol. 122(2), pages 197-202.
    17. repec:red:issued:15-42 is not listed on IDEAS
    18. Merike Kukk & Dmitry Kulikov & Karsten Staehr, 2016. "Estimating Consumption Responses to Income Shocks of Different Persistence Using Self-Reported Income Measures," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 62(2), pages 311-333, June.
    19. Davis, Morris A. & Van Nieuwerburgh, Stijn, 2015. "Housing, Finance, and the Macroeconomy," Handbook of Regional and Urban Economics, Elsevier.
    20. Almudena Sevilla Sanz & Annalisa Cristini, 2011. "Do House Prices Affect Consumption? A Comparison Exercise," Economics Series Working Papers 589, University of Oxford, Department of Economics.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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