Can Owning a Home Hedge the Risk of Moving?

Todd Sinai and Nicholas Souleles

American Economic Journal: Economic Policy, 2013, vol. 5, issue 2, 282-312

Abstract: For households that face a possibility of moving across MSAs, the risk of home owning depends on the covariance of the sale prices of their current houses with the purchase prices of their likely future houses. We find empirically that households tend to move between highly correlated MSAs, significantly increasing the distribution of expected correlations in real house price growth across MSAs, and so raising the "moving-hedge" value of owning. Own/rent decisions are sensitive to this hedging value, with households being more likely to own when their hedging value is greater due to higher expected correlations and likelihoods of moving. JEL (D14, R21, R23, R31)

JEL-codes: D14 R21 R23 R31 (search for similar items in EconPapers)
Date: 2013
Note: DOI: 10.1257/pol.5.2.282
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Citations: View citations in EconPapers (26)

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Working Paper: Can Owning a Home Hedge the Risk of Moving? (2009)
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