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Sharing the Risk of Home-ownership: A Portfolio Approach

Author

Listed:
  • Diana Mok

    (Department of Geography, University of Toronto, Toronto, Canada, M5S 3G3, diana.mok@utoronto.ca)

Abstract

This paper examines the relationships among the desirability of home-ownership, price risks and the return of housing investment. It argues that price risks may undermine the desirability of ownership, using both a theoretical and an empirical approach. The theoretical model studies aspatially the equilibrium house prices in a two-good, pure exchange economy, where investors (consumers) differ in their level of risk aversion. It shows that larger price risks and higher level of risk aversion decrease the attractiveness of owning a house. The empirical component uses current status data and a proportional hazard model to show the effect of risks and returns on households' hazard rates to be owners. The implication points to the inadequacy of the conventional housing finance arrangements, which provide little help for households to diversify or hedge the risk of home-ownership.

Suggested Citation

  • Diana Mok, 2002. "Sharing the Risk of Home-ownership: A Portfolio Approach," Urban Studies, Urban Studies Journal Limited, vol. 39(7), pages 1095-1112, June.
    • Handle: RePEc:sae:urbstu:v:39:y:2002:i:7:p:1095-1112
    DOI: 10.1080/00420980220135509
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    References listed on IDEAS

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    Cited by:

    1. Fisher, Monica G. & Weber, Bruce A., 2004. "Does Economic Vulnerability Depend On Place Of Residence? Asset Poverty Across The Rural-Urban Continuum," Working Papers 18911, Oregon State University, Rural Poverty Research Center (RPRC).

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