Housing Decisions
Final Report Abstract
The project funded contributes to the literature on “housing decisions” in two dimensions. First, it sets up a life-cycle model that demonstrates that the risk of divorce has an impact on the demand for owner-occupied homes. Specifically, divorce risk generates a precautionary-savings motive. Simultaneously, savings for the downpayment partly substitute for precautionary savings. That is, the opportunity to invest into owner-occupied homes dampens precuationary saving. When young, the larger asset accumulation due to divorcerisk induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownerhsip for middleaged and older households when divorce risk goes up. Second, the project uses micro-level data from the Danish Registry to explore how the propensity to acquire homeownership varies with household characteristics over the housing market cycle. We document that poorer households, households with lower education, singles, and younger households reduced their propensity to acquire homeownership under the bust more than other households. Simultaneously, younger households increased their likelihood to abandon homeownership during the bust more than other households. This pattern has led to a significant inter-generational shift in homeownership from younger to older households.
Publications
- (2019): Housing decision with divorce risk, International Economic Review, 60(3), 1263-1290
Fischer, M. und Khorunzhina, N.
(See online at https://doi.org/10.1111/iere.12385) - (2019): Who buys homes when prices fall? Working paper, University of Konstanz and Copenhagen Business School
Fischer, M. und Khorunzhina, N. und Marx, J.
