Endogenous Mortgage Choice, Borrowing Constraints and the Tenure Decision
Earlier research has shown that lender income and wealth constraint ratios discourage homeownership. This empirical research has been based on home purchasers using an 80 percent loan-to-value (LTV) fixed-rate conventional loan. Employing the same assumption, we find that the constraints lowered the ownership rate of our 1919 young home purchasers by about 20 percentage points. However, households are not restricted to putting 20 percent down and choosing a fixed- rate loan. When we allow households to select the optimal LTV and mortgage type (adjustable or fixed-rate with Federal Housing Administration (FHA) or conventional insurance), the percentage of our sample that is credit constrained declines from 71 to 49. Moreover, the measured impact on the homeownership rate of the constraints falls to only 4 percentage points. Further, FHA loans are estimated to increase homeownership by only 0.1 to 0.2 percentage points.
|Date of creation:||Mar 1995|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.nber.org
More information through EDIRC
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.:
- Peter Linneman & Susan Wachter, 1989. "The Impacts of Borrowing Constraints on Homeownership," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(4), pages 389-402.
- Heckman, James J, 1979.
"Sample Selection Bias as a Specification Error,"
Econometric Society, vol. 47(1), pages 153-61, January.
- Lawrence D. Jones, 1989. "Current Wealth and Tenure Choice," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 17(1), pages 17-40.
- Patric H. Hendershott & William C. LaFayette, 1995. "Debt Usage and Mortgage Choice: Sensitivity to Default Insurance Costs," NBER Working Papers 5069, National Bureau of Economic Research, Inc.
- Donald R. Haurin & Patric H. Hendershott & David C. Ling, 1987. "Homeownership Rates of Married Couples: An Econometric Investigation," NBER Working Papers 2305, National Bureau of Economic Research, Inc.
- Haurin Donald R. & Hendershott Patric H. & Kim Dongwook, 1994. "Housing Decisions of American Youth," Journal of Urban Economics, Elsevier, vol. 35(1), pages 28-45, January.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:5074. 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: ()
If references are entirely missing, you can add them using this form.