The Impacts of Borrowing Constraints on Homeownership

Peter Linneman and Susan Wachter

Real Estate Economics, 1989, vol. 17, issue 4, 389-402

Abstract: This paper utilizes microdata to directly quantify the impact of mortgage underwriting criteria on individual homeownership propensities. To determine whether a family is constrained by these criteria, the optimal home purchase price is estimated. The results indicate that wealth and income constraints both reduce homeownership propensities, with a stronger impact for wealth constraints. Mortgage market innovations of the early 1980s seem to have reduced these effects. The research indicates, however, that even in well‐developed capital markets, the presence of borrowing constraints adversely affects homeownership propensities.

Date: 1989
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