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Do Households Use Homeownership To Insure Themselves? Evidence across US Cities

Author

Listed:
  • Michael Amior

    (UCL)

  • Jonathan Halket

    (UCL)

Abstract

Are households more likely to be homeowners when “housing risk” is higher? We show that homeownership rates and loan-to-value (LTV) ratios at the city level are strongly negatively correlated with house price levels and the variance of house price growth rates in the city. But both price levels and the variance of their growth rates are themselves correlated with the relative value of land in the city, even when land value is instrumented for using topographic measures. We disentangle the contributions of high prices from high variances by building a life-cycle model of homeownership choices. The model is able to explain much of the cross-city dispersion in homeownership and LTV. We find that higher price levels explain the lower homeownership while higher risk explains the lower LTV in high land value cities. The variation in LTV with risk highlights the importance of including other means of insurance in models of homeownership.

Suggested Citation

  • Michael Amior & Jonathan Halket, 2011. "Do Households Use Homeownership To Insure Themselves? Evidence across US Cities," 2011 Meeting Papers 276, Society for Economic Dynamics.
  • Handle: RePEc:red:sed011:276
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    Cited by:

    1. Jonathan Halket & Lars Nesheim & Florian Oswald, 2015. "The housing stock, housing prices, and user costs: the roles of location, structure and unobserved quality," CeMMAP working papers CWP73/15, Centre for Microdata Methods and Practice, Institute for Fiscal Studies.
    2. 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.
    3. Charles Ka Yui LEUNG & Joe Cho Yiu NG, 2018. "Macro Aspects of Housing," ISER Discussion Paper 1030, Institute of Social and Economic Research, Osaka University.
    4. Jonathan Halket & Lars Nesheim & Florian Oswald, 2020. "The Housing Stock, Housing Prices, And User Costs: The Roles Of Location, Structure, And Unobserved Quality," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(4), pages 1777-1814, November.
    5. Serafin J. Grundl & You Suk Kim, 2019. "The Marginal Effect of Government Mortgage Guarantees on Homeownership," Finance and Economics Discussion Series 2019-027, Board of Governors of the Federal Reserve System (U.S.).
    6. Yuliya Demyanyk & Dmytro Hryshko & Maria Jose Luengo-Prado & Bent E. Sorensen, 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.
    7. Halket, Jonathan R & Vasudev, Santhanagopalan, 2012. "Home Ownership, Savings, and Mobility Over The Life Cycle," Economics Discussion Papers 2876, University of Essex, Department of Economics.
    8. Mika Kortelainen & Tuukka Saarimaa, 2012. "Do Homeowners Benefit Urban Neighborhoods? Evidence from Housing Prices," SERC Discussion Papers 0110, Spatial Economics Research Centre, LSE.
    9. John Gathergood & Joerg Weber, 2015. "Is Poor Financial Literacy a Barrier to Home Ownership?," Discussion Papers 2015/16, University of Nottingham, Centre for Finance, Credit and Macroeconomics (CFCM).
    10. Halket, Jonathan R & Pignatti, Matteo, 2012. "Housing tenure choices with private information," Economics Discussion Papers 8961, University of Essex, Department of Economics.
    11. Meta Brown & Sarah Stein & Basit Zafar, 2015. "The Impact of Housing Markets on Consumer Debt: Credit Report Evidence from 1999 to 2012," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 47(S1), pages 175-213, March.
    12. Jonathan Halket & Santhanagopalan Vasudev, 2014. "Saving Up or Settling Down: Home Ownership over the Life Cycle," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 17(2), pages 345-366, April.
    13. Gathergood, John & Weber, Jörg, 2017. "Financial literacy: A barrier to home ownership for the young?," Journal of Urban Economics, Elsevier, vol. 99(C), pages 62-78.
    14. Davis, Morris A. & Van Nieuwerburgh, Stijn, 2015. "Housing, Finance, and the Macroeconomy," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.),Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 753-811, Elsevier.
    15. Anson T. Y. Ho & Jie Zhou, 2016. "Housing and Tax-Deferred Retirement Accounts," Staff Working Papers 16-24, Bank of Canada.
    16. Damianov, Damian S & Escobari, Diego, 2019. "Getting on and moving up the property ladder: Real hedging in the U.S. housing market before and after the crisis," MPRA Paper 92389, University Library of Munich, Germany.
    17. Halket, Jonathan & Pignatti Morano di Custoza, Matteo, 2015. "Homeownership and the scarcity of rentals," Journal of Monetary Economics, Elsevier, vol. 76(C), pages 107-123.

    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
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • 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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