Housing Tenure Choice Implications of Social Networks

The recent literature on tenure choice has been focusing increasingly on the information aspects of the tenure choice dec ision. However, despite the obvious information channel between social networks and tenure choice, the relationship has drawn little attention in academic research. Since the homeownership decision is almost always associated with a change of location, researchers have often emphasized the importance of modeling tenure choice and mobility decisions jointly. In that joint decision process, the impact of social networks may be multidimensional. Social networks, which in large part are tied to the physical location, are likely to increase the transaction costs of relocation. On the other hand, social networks may ease encourage homeowning through the information channel (e.g., by providing information about mortgage loans and related credit issues, etc.). We estimate the effect of social networks on the joint tenure-mobility decision mechanism. We also address the issue of potential endogeneity of social networks in this joint mobility-tenure choice decision process.