Premium
Does Investment Risk Affect the Housing Decisions of Families?
Author(s) -
Turner Tracy M.
Publication year - 2003
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1093/ei/cbg036
Subject(s) - economics , purchasing , volatility (finance) , affect (linguistics) , investment (military) , investment decisions , demographic economics , survey data collection , labour economics , public economics , actuarial science , finance , behavioral economics , operations management , linguistics , philosophy , statistics , mathematics , politics , political science , law
Households assume substantial house‐price risk when purchasing a home. This article investigates the effect of such risk on families' housing decisions. Using a repeat cross‐section of household data from the American Housing Survey spanning a 10‐year period and measures of expected return and time‐varying risk, I find that families are less likely to own and housing demand is reduced during episodes of relatively high, anticipated house‐price volatility. The impact is greater on low‐ and moderate‐income families and first‐time homeowners than other groups. The results hold implications for policies designed to assist homeowners in lessening the risk they bear. (JEL R21 , D12 , D84 )