|Institution:||The Ohio State University|
|Keywords:||Economics; Down Payment Constraint; Probability of Owning; Tax Advantage of Homeownership; House Price Risks|
|Full text PDF:||http://rave.ohiolink.edu/etdc/view?acc_num=osu1275015646|
Chapter 1 focuses on how changes in the down payment constraint affect the wealth accumulation profile of young households. I solve a life cycle model incorporating housing as a consumption good as well as an investment good. In the model, I simulate the effect of changes in the minimum required down payment rate and changes in the house price level. One hypothesis is that changes in the borrowing constraint influence the relationship between people’s first transition age from renting to owning and their saving behavior before owning. Also, changes in the down payment constraint influence the effect of house price on wealth. With a panel data set for youth age 20-33 for the years between 1996 and 1999, I conduct an empirical analysis to test the above hypotheses. By comparing my empirical results with a previous study focused on U.S. youth for the years 1985 through 1990, I find that the effect of the "probability of owning", as well as the direct impact of house price on wealth, has been reduced and becomes much less significant. Chapter 2 focuses on the effect of house price risks on young people’s homeownership behavior, via relaxing the down payment constraint. Extended from the model in the first chapter, I explicitly incorporate the stochastic path of house prices in the analysis. And I simulate the effect of house price risks on people's first transition age from renters to owners and on the homeownership rate. I find house price risks have a positive effect on young people’s homeownership propensities. Moreover, relaxation of the down payment constraint will amplify this positive effect. I conduct an empirical test with U.S. young households age 20-33 for the years between 1989 and 2000. I find that when controlling for state dummy variables, house price risk has a positive effect on young people’s homeownership propensities. And this effect is bigger in the late 1990s with a relaxed down payment constraint than it is in an earlier period with a higher down payment requirement.