Inflation, Taxes, and the Demand For Housing*

Thomas P. Boehm and Joseph A. McKenzie

Real Estate Economics, 1982, vol. 10, issue 1, 25-38

Abstract: Inflation affects homeownership and housing adversely through the “real‐payment tilt” of the conventional mortgage. Expectations of additional housing price appreciation, however, may induce households to invest in housing. This paper uses household data to estimate the demand for homeownership and housing, and it takes explicit notice of expectations of housing price appreciation. The results indicate for each 1% increase in the inflation rate that the conditional probability of purchase falls by 3%. Interest rate effects outweigh appreciation and tax effects. Given the decision to purchase, housing appreciation expectations do not have large effects on the amount purchased.

Date: 1982
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