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HOMEOWNERSHIP AND HOUSING TRANSITIONS: EXPLAINING THE DEMOGRAPHIC COMPOSITION
Author(s) -
Ma Eunseong,
Zubairy Sarah
Publication year - 2021
Publication title -
international economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.658
H-Index - 86
eISSN - 1468-2354
pISSN - 0020-6598
DOI - 10.1111/iere.12493
Subject(s) - renting , debt , housing tenure , investment (military) , database transaction , economics , loan , order (exchange) , value (mathematics) , demographic economics , econometrics , monetary economics , finance , statistics , mathematics , politics , political science , computer science , law , programming language
We document the evolution of homeownership rate across various age groups for the period 1995–2015. We find that variations in the homeownership rates are relatively large for the young, which is mostly driven by renter‐to‐owner transitions. In order to explain these empirical facts, we consider a life‐cycle model featuring housing tenure decisions. Housing is modeled as an indivisible and lumpy investment subject to both loan‐to‐value (LTV) and debt‐to‐income (DTI) credit constraints and transaction fees. Our analysis suggests that variations in the DTI limit play a crucial role in accounting for the uneven behavior across age groups.