Dynastic Home Equity

Matteo Benetton (), Marianna Kudlyak and John Mondragon
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Matteo Benetton: https://haas.berkeley.edu/faculty/matteo-benetton/

No 2022-13, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Using a nationally-representative panel of consumer credit records for the US from 1999 to 2021, we document a positive correlation between child and parent homeownership. We propose a new causal mechanism behind this relationship: parents extract home equity to help finance their child’s home purchase. To identify the mechanism, we use fixed effect, event study, local projection and matching methods. We find that children whose parents extract equity: (i) are 60-80% more likely to become homeowners; (ii) have lower leverage at origination; and (iii) buy higher-valued homes and at a younger age. The effects are stronger when housing affordability is worse and children’s financial constraints are more likely to bind. Using a simple structural model, we find that in a counterfactual economy with no role for parental equity, intergenerational homeownership mobility increases.

Keywords: home equity; intergenerational wealth; inequality; mortgages; housing; household finance (search for similar items in EconPapers)
JEL-codes: D31 D64 E21 G5 G51 (search for similar items in EconPapers)
Pages: 71
Date: 2024-02-01
New Economics Papers: this item is included in nep-ure
Note: Original publication date: 7/9/2022.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Working Paper: Dynastic Home Equity (2022)
Working Paper: Dynastic Home Equity (2022)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:94494

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DOI: 10.24148/wp2022-13

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