Dynastic Home Equity

Matteo Benetton (), Marianna Kudlyak and John Mondragon
Additional contact information
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 based on parents extracting home equity to help finance their child's home purchase and quantify this mechanism in several ways. First, controlling for cohort, zip code, age, and the creditworthiness of parents and children, we find that children whose parents extract equity are 60% more likely to become a homeowner than children whose homeowner-parents do not extract equity. Second, using an event study approach, we find that the increase in child homeownership occurs almost entirely in the year when parents extract equity. Third, using variation in equity extraction induced by households near leverage constraints, we find parental equity extraction increases the child's probability of becoming a homeowner by about five times. Our results highlight the importance of familial wealth for household wealth accumulation and housing wealth in particular. A back-of-the-envelope calculation suggests that dynastic home equity increases housing wealth inequality among young adults by 20%.

Keywords: home equity; intergenerational wealth; inequality; mortgages; housing; household finance (search for similar items in EconPapers)
Pages: 57
Date: 2022-07-09
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.frbsf.org/wp-content/uploads/sites/4/wp2022-13.pdf Full text - article PDF (application/pdf)

Related works:
Working Paper: Dynastic Home Equity (2022)
Working Paper: Dynastic Home Equity (2022)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedfwp:94494

Ordering information: This working paper can be ordered from

DOI: 10.24148/wp2022-13

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().