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Alternative Mortgage Instruments: Their Effects On Consumer Housing Choices in an Inflationary Environment

Author

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  • James Alm

    (Syracuse University)

  • James R. Follain Jr.

    (Syracuse University)

Abstract

This article compares the effects of the standard fixed-payment mortgage instrument (SMI) and the graduated-payment mortgage instrument on an individual's housing decisions in an inflationary environment. Using a simulation model of life-cycle consumer choice, the results with the SMI suggest that low to moderate rates of inflation increase housing demand but rates in excess of 10% have the opposite effect. The results also suggest that the GPM has the potential to increase substantially housing demand, with households willing to pay moderate premiums in order to obtain GPMs.

Suggested Citation

  • James Alm & James R. Follain Jr., 1982. "Alternative Mortgage Instruments: Their Effects On Consumer Housing Choices in an Inflationary Environment," Public Finance Review, , vol. 10(2), pages 134-157, April.
    • Handle: RePEc:sae:pubfin:v:10:y:1982:i:2:p:134-157
    DOI: 10.1177/109114218201000202
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    References listed on IDEAS

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    Cited by:

    1. Robert M. Schwab, 1982. "Modeling a Down-Payment Constraint: Comment," Public Finance Review, , vol. 10(2), pages 218-221, April.
    2. Robert M. Schwab, 1985. "Pay-As-You-Go versus Advance-Funded Public Pension Systems under Imperfect Capital Markets," Public Finance Review, , vol. 13(3), pages 269-291, July.
    3. Patric H. Hendershott & James D. Shilling, 1982. "Capital Allocation and the Economic Recovery Tax Act of 1981," Public Finance Review, , vol. 10(2), pages 242-273, April.
    4. Ross Guest & Robyn Swift, 2010. "Population Ageing and House Prices in Australia," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 43(3), pages 240-253, September.
    5. Fortin, Mario, 1991. "Une comparaison des taux d’imposition implicites des services du logement locatif et du logement occupé par son propriétaire," L'Actualité Economique, Société Canadienne de Science Economique, vol. 67(1), pages 37-57, mars.
    6. Basant Kapur, 2006. "Financial liberalization and short-run housing price dynamics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 29(3), pages 649-675, November.
    7. Joel Slemrod, 1982. "Down-Payment Constraints: Tax Policy Effects in a Growing Economy With Rental and Owner-Occupied Housing," Public Finance Review, , vol. 10(2), pages 193-217, April.
    8. Laurence S. Seidman & Kenneth A. Lewis, 1997. "The Design of a Tax Rule for Owner-Occuped Housing Under a Personal Consumption Tax," Public Finance Review, , vol. 25(1), pages 5-24, January.
    9. Takase, Mitsuo, 1992. "Housing purchase and saving behavior under unanticipated inflation," Mathematics and Computers in Simulation (MATCOM), Elsevier, vol. 33(5), pages 551-556.
    10. Michael J. Lea, 1982. "Housing Demand and the Standard Mortgage Instrument: Comment," Public Finance Review, , vol. 10(2), pages 185-192, April.
    11. J. Ronnie Davis, 2020. "History of a Journal: Public Finance Quarterly to Public Finance Review," Public Finance Review, , vol. 48(3), pages 285-302, May.
    12. Ross Guest, 2004. "Housing Affordability Options for First Home Owner-Occupiers in Australia: A Simulation Analysis," Econometric Society 2004 Australasian Meetings 66, Econometric Society.
    13. Ross S. Guest, 2005. "A Life Cycle Analysis of Housing Affordability Options for First Home Owner‐Occupiers in Australia," The Economic Record, The Economic Society of Australia, vol. 81(254), pages 237-248, September.

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