Accounting for Changes in the Homeownership Rate

By Matthew S. Chambers, Carlos Garriga, D. Schlagenhauf. 2007

314 citations recorded by the source corpus.

After three decades of being relatively constant, the homeownership rate increased over the period 1994 to 2005 to attain record highs. The objective of this paper is to account for the observed boom in ownership by examining the role played changes in demographic factors and innovations in the mortgage market which lessened downpayment requirements. To measure the aggregate and distributional impact of these factors, we construct a quantitative general equilibrium overlapping generation model with housing. We find that the long-run importance of the introduction of new mortgage products for the aggregate homeownership rate ranges from 56 and 70 percent. Demographic factors account for between 16 and 31 percent of the change. Transitional analysis suggests that demographic factors play a more important, but not dominant, role the further away from the long-run equilibrium. From a distributional perspective, mortgage market innovations have a larger impact explaining participation rate changes of younger households, while demographic factors seem to be the key to understanding the participation rate changes of older households. Our analysis suggests that the key to understand the increase in the homeownership rate is the expansion of the set of mortgage contracts. We test the robustness of this result by considering changes in mortgage financing after World War II. We find that the introduction of the conventional fixed rate mortgage, which replaced balloon contacts, accounts for at least fifty percent of the observed increase in homeownership during that period.

Subfields: Accounting, Economics and Econometrics, Finance

View Paper: https://www.semanticscholar.org/paper/b3a072554073a609a7e0499e44f7ee70d13bfb7c

How researchers see this paper

The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.

In Accounting

In Economics and Econometrics

In Finance

Citations in the corpus

HOUSING DYNAMICS OVER THE BUSINESS CYCLE (2016, background): “A representative household has preferences over consumption of a market-produced good cMt, a home-produced good cHt, and leisure, which is 17 Gervais (2002), Rios-Rull and Sanchez-Marcos (2008), and Chambers et al. (2009) develop models with many of the microlevel details we abstract from.”
CONSUMPTION AND SAVING OVER THE LIFE CYCLE: HOW IMPORTANT ARE CONSUMER DURABLES? (2011, background): “Important examples of this work include Hurst and Stafford (2004), Luengo-Prado (2006), and Chambers et al. (2009a, 2009b).”
A Dynamic Model of Housing Demand: Estimation and Policy Implications (2010, unknown): “We supplement our data with 30 year fixed interest mortgage rates from the Federal Housing Finance Agency.(8) We use the home price index from the Federal Housing Finance Agency which collects home price information from home sales financed with Fannie Mae and Freddie Mac conventional mortgages.”
The Loan Structure and Housing Tenure Decisions in an Equilibrium Model of Mortgage Choice (2007, background): “In Chambers, Garriga, and Schlagenhauf (2005), we show that the combo loan increases the aggregate homeownership rate.”
Why Has Home Ownership Fallen among the Young (2009, unknown): “Chambers et al. (2009) study how changes in mortgages can account for the large increase in overall home ownership after World War II and the additional increase between 1995 and 2005.”
The Distribution of Debt Across Euro Area Countries: The Role of Individual Characteristics, Institutions and Credit Conditions (2013, methodology): “In particular, the models of Chambers et al. (2009a) and Ortalo-Magné and Rady (1999, 2006) analyze the impact of LTV ratios on the chances of young and low-income households holding debt.”
The equilibrium effect of fundamentals on house prices and rents (2013, background): “Chambers et al. (2008) and Duca, Muellbauer, and Murphy (2011) document a decrease in the average down payments for all borrowers and first-time homebuyers, respectively, since 1995 and use these shifts to proxy the relaxation of lending standards during the housing boom. Chomsisengphet and Penningt”
Winners and Losers in Housing Markets (2011, unknown): “Moreover, in an economy where land is more important for producing tangible assets 1Here, the importance of land for production of tangible asset is de ned as the elasticity of tangible asset supply with respect to land for a xed level of the other input.”