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Wealth Accumulation and Housing Choices of Young Households: An Exploratory Investigation

Author

Listed:
  • Donald R. Haurin
  • Susan M. Wachter
  • Patric H. Hendershott

Abstract

This paper describes the wealth accumulation of American youth and relates this behavior to their eventual housing choices. We develop a data set that links wealth profiles of youth with constant- quality house prices and tenure choice. A panel data set is compiled for youth age 20-33 for the years 1985 through 1990. We construct wealth profiles for each household over the six year period and indicate how wealth varies with labor supply, marriage, fertility, gender, education, race/ethnicity, and tenure choice. We find renters' wealth accumulates rapidly in the year before and year of first homeownership. The factors related to this increase are marriage, increased labor supply by married women, and gifts/inheritances. Of particular interest is the finding of an inverse U-shaped relationship between the local real price of housing and middle and upper income renters' wealth and married female labor supply. Also, youth in high housing cost localities tend to live in groups at a greater rate compared to those in low cost areas.

Suggested Citation

  • 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.
  • Handle: RePEc:nbr:nberwo:5070
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    References listed on IDEAS

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    1. Francine D. Blau & John W. Graham, 1990. "Black-White Differences in Wealth and Asset Composition," The Quarterly Journal of Economics, Oxford University Press, vol. 105(2), pages 321-339.
    2. William G. Gale & John Karl Scholz, 1994. "Intergenerational Transfers and the Accumulation of Wealth," Journal of Economic Perspectives, American Economic Association, vol. 8(4), pages 145-160, Fall.
    3. Engelhardt Gary V., 1994. "House Prices and the Decision to Save for Down Payments," Journal of Urban Economics, Elsevier, vol. 36(2), pages 209-237, September.
    4. Stephen A. Buser & Anthony B. Sanders, 1983. "Tenure Decisions Under a Progressive Tax Structure," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 11(3), pages 371-381.
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    Cited by:

    1. Jonas D. M. Fisher & Martin Gervais, 2011. "Why Has Home Ownership Fallen Among The Young?," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 52(3), pages 883-912, August.
    2. Green, Richard K., 1996. "Should the stagnant homeownership rate be a source of concern?," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 337-368, June.
    3. François Ortalo-Magné & Sven Rady, 2006. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints ," Review of Economic Studies, Oxford University Press, vol. 73(2), pages 459-485.
    4. Edward L. Glaeser & Joshua D. Gottlieb & Joseph Gyourko, 2012. "Can Cheap Credit Explain the Housing Boom?," NBER Chapters,in: Housing and the Financial Crisis, pages 301-359 National Bureau of Economic Research, Inc.
    5. Goodman, John Jr. & Nichols, Joseph B., 1997. "Does FHA Increase Home Ownership or Just Accelerate It?," Journal of Housing Economics, Elsevier, vol. 6(2), pages 184-202, June.
    6. Jonas D. M. Fisher & Martin Gervais, 2007. "First-time home buyers and residential investment volatility," Working Paper Series WP-07-15, Federal Reserve Bank of Chicago.
    7. Del Boca, Daniela & Lusardi, Annamaria, 2003. "Credit market constraints and labor market decisions," Labour Economics, Elsevier, vol. 10(6), pages 681-703, December.
    8. Renata Bottazzi, 2004. "Labour market participation and mortgage related borrowing constraints," IFS Working Papers W04/09, Institute for Fiscal Studies.
    9. Gervais, Martin & Fisher, Jonas, 2009. "Why has home ownership fallen among the young?," Discussion Paper Series In Economics And Econometrics 0907, Economics Division, School of Social Sciences, University of Southampton.
    10. Joseph Nichols & Anthony Pennington-Cross & Anthony Yezer, 2004. "Borrower Self-Selection, Underwriting Costs, and Subprime Mortgage Credit Supply," The Journal of Real Estate Finance and Economics, Springer, vol. 30(2), pages 197-219, November.
    11. repec:esx:essedp:712 is not listed on IDEAS
    12. Michaud, Amanda & Rothert, Jacek, 2014. "Optimal borrowing constraints and growth in a small open economy," Journal of International Economics, Elsevier, vol. 94(2), pages 326-340.
    13. Carvalho, Kátia & Nascimento, Mabel & Neri, Marcelo Côrtes, 2000. "Ciclo de vida e motivações financeiras," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 393, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    14. Kelly, Austin, 2007. "Zero down payment mortgage default," MPRA Paper 4318, University Library of Munich, Germany.
    15. Gennadi Kazakevitch & Luc Borrowman, 2009. "Housing affordability: Proper Measurement for Informed Policy Making," Monash Economics Working Papers 08-09, Monash University, Department of Economics.
    16. Serena Trucchi, 2011. "How credit markets affect homeownership: an explanation based on differences between Italian regions," CeRP Working Papers 122, Center for Research on Pensions and Welfare Policies, Turin (Italy).
    17. Michael A. Stegman & Allison Freeman & Jong-Gyu Paik, 2007. "The portfolios and wealth of low-income homeowners and renters: findings from an evaluation of Self-Help Ventures Fund’s Community Advantage Program," Community Development Investment Center Working Paper 2007-02, Federal Reserve Bank of San Francisco.
    18. Ortalo-Magné, François & Rady, Sven, 2005. "Housing Market Dynamics: On the Contribution of Income Shocks and Credit Constraints (Revised Version)," Discussion Papers in Economics 494, University of Munich, Department of Economics.
    19. Neri, Marcelo Côrtes, 2015. "Microinsurance: income risk, social security and the demand for private onsurance by low-income families," FGV/EPGE Economics Working Papers (Ensaios Economicos da EPGE) 771, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil).
    20. Deng, Yongheng & Ross, Stephen L. & Wachter, Susan M., 2003. "Racial differences in homeownership: the effect of residential location," Regional Science and Urban Economics, Elsevier, vol. 33(5), pages 517-556, September.
    21. Wenli Li & Fang Yang, 2010. "American dream or American obsession? The economic benefits and costs of homeownership," Business Review, Federal Reserve Bank of Philadelphia, issue Q3, pages 20-30.
    22. Gary Engelhardt, 2001. "Nominal Loss Aversion, Housing Equity Constraints, and Household Mobility: Evidence from the United States," Center for Policy Research Working Papers 42, Center for Policy Research, Maxwell School, Syracuse University.
    23. 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.).

    More about this item

    JEL classification:

    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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