Housing market dynamics:: On the contribution of income shocks and credit constraints

• 成果类型: Article
• 署名作者: Ortalo-Magne, Francois; Rady, Sven
• 署名单位: University of Wisconsin System; University of Wisconsin Madison; University of Munich
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1111/j.1467-937X.2006.383_1.x
• 发表日期: 2006
• 页码: 459-485
• 关键词: real-estate; borrowing constraints; young households; Price dynamics; loss aversion; mobility; equity; MODEL; transactions; consumption

摘要

We propose a life-cycle model of the housing market with a property ladder and a credit constraint. We focus on equilibria that replicate the facts that credit constraints delay some households' first home purchase and force other households to buy a home smaller than they would like. The model helps us identify a powerful driver of the housing market: the ability of young households to afford the down payment on a starter home, and in particular their income. The model also highlights a channel whereby changes in income may yield housing price overreaction, with prices of trade-up homes displaying the most volatility, and a positive correlation between housing prices and transactions. This channel relies on the capital gains or losses on starter homes incurred by credit-constrained owners. We provide empirical support for our arguments with evidence from both the U.K. and the U.S.