House price rises and borrowing to invest

Thomas Crossley (), Peter Levell and Hamish Low

Journal of Economic Behavior & Organization, 2024, vol. 223, issue C, 86-105

Abstract: Household borrowing and spending rise with house prices, particularly for leveraged households, but household spending is not consumption. We propose a borrow-to-invest motive by which house price gains affect household spending on residential investment: rational, leveraged households have an incentive to make additional residential investments when house prices rise. Credit constraints then matter through reducing access to leveraged returns and so reducing lifetime resources, rather than through consumption smoothing. We test this motive by comparing responses in different categories of spending across more and less leveraged households. We find strong evidence of the borrow-to-invest motive in UK data.

Keywords: House prices; Leverage; Consumption; Home investment (search for similar items in EconPapers)
JEL-codes: D14 D15 E21 G51 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268124001707
Full text for ScienceDirect subscribers only

Related works:
Working Paper: House price rises and borrowing to invest (2024)
Working Paper: House Price Rises and Borrowing to Invest (2022)
Working Paper: House Price Rises and Borrowing to Invest (2020)
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:eee:jeborg:v:223:y:2024:i:c:p:86-105

DOI: 10.1016/j.jebo.2024.05.002

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().