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Down Payments and the Homeownership Dream: Not Such a Barrier After All?

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This paper uses a structural model to quantitatively evaluate whether and under what conditions loose credit constraints are essential to achieving a high homeownership rate. A dichotomy emerges between the short run and long run response to a moderate tightening of credit, with homeownership initially falling before gradually reverting to its original level. When consumption and housing are complements, this long-run stability is robust to larger credit shifts,though the short-run adjustment can be severe. These results suggest that policymakers may have more latitude than thought in pursuing other objectives(e.g. macroprudential stabilization) without harming long-run homeownership.

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  • Aaron Hedlund, 2018. "Down Payments and the Homeownership Dream: Not Such a Barrier After All?," Working Papers 1806, Department of Economics, University of Missouri.
    • Handle: RePEc:umc:wpaper:1806
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    1. Hedlund, Aaron, 2018. "Credit constraints, house prices, and the impact of life cycle dynamics," Economics Letters, Elsevier, vol. 171(C), pages 202-207.

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    Keywords

    Homeownership; Credit Constraints; Housing; Debt; Mortgages;
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