INVESTMENT RISK AND THE TRANSITION INTO HOMEOWNERSHIP

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Abstract:

ABSTRACT. 

This paper investigates the extent to which house–price uncertainty affects the transition of renter households into homeownership. Using a 14-year household panel from the Panel Study of Income Dynamics during the years 1984–1997 and measures of the time-varying risk and return to owner-occupied housing, we estimate a Cox proportional hazard model of the effect of house–price volatility on the transition into homeownership. Results indicate that house–price uncertainty has a negative and dramatic impact on transitions into homeownership. In addition, we find that the low-wealth renters are particularly sensitive to house–price risk.

Keywords: D12; D84; R0; homeownership; house–price; uncertainty

Document Type: Research Article

DOI: http://dx.doi.org/10.1111/j.1467-9787.2007.00507.x

Affiliations: 1: Kansas State University, Department of Economics, 315 Waters Hall, Manhattan, KS 66506-4001, Email: turner@ksu.edu 2: Kansas State University, Department of Economics, 327 Waters Hall, Manhattan, KS 66506-4001, Email: daigyo@ksu.edu

Publication date: May 1, 2007

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