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Rent or Buy? Inflation Experiences and Homeownership within and across Countries

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  • ULRIKE MALMENDIER
  • ALEXANDRA STEINY WELLSJO

Abstract

We show that past inflation experiences strongly predict homeownership within and across countries. First, we collect novel survey data, which reveal inflation protection to be a key motivation for homeownership, especially after high inflation experiences. Second, using household data from 22 European countries, we find that higher exposure to historical inflation predicts higher homeownership rates. We estimate similar associations among immigrants to the United States who experienced different past inflation in their home countries but face the same U.S. housing market. Consistent with the experience effects model, the relationship is strongest in countries with predominantly fixed‐rate mortgages.

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  • Ulrike Malmendier & Alexandra Steiny Wellsjo, 2024. "Rent or Buy? Inflation Experiences and Homeownership within and across Countries," Journal of Finance, American Finance Association, vol. 79(3), pages 1977-2023, June.
    • Handle: RePEc:bla:jfinan:v:79:y:2024:i:3:p:1977-2023
    DOI: 10.1111/jofi.13332
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