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.
|Date of creation:||22 Oct 1998|
|Date of revision:||25 Oct 1998|
|Note:||Type of Document - Acrobat PDF; prepared on PC; pages: 10 ; figures: included. Prepared for Session B1, "Theories of Money, Credit and Aggregate Economic Activity" (organized by Nobuhiro Kiyotaki, London School of Economics), at the 13th Annual Congress of the European Economic Association, Berlin, September 1998.|
|Contact details of provider:|| Web page: http://econwpa.repec.org|
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.:
- Muellbauer, John & Murphy, Anthony, 1997.
"Booms and Busts in the UK Housing Market,"
Royal Economic Society, vol. 107(445), pages 1701-27, November.
- 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.
When requesting a correction, please mention this item's handle: RePEc:wpa:wuwpfi:9810004. 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: (EconWPA)
If references are entirely missing, you can add them using this form.