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.
Bibliographical notePublisher Copyright:
© (2020) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
All Science Journal Classification (ASJC) codes
- Economics and Econometrics