Owner-Occupied Housing as a Hedge Against Rent Risk

Todd Sinai and Nicholas S. Souleles

The Quarterly Journal of Economics, 2005, vol. 120, issue 2, 763-789

Abstract: The conventional wisdom that homeownership is very risky ignores the fact that the alternative, renting, is also risky. Owning a house provides a hedge against fluctuations in housing costs, but in turn introduces asset price risk. In a simple model of tenure choice with endogenous house prices, we show that the net risk of owning declines with a household's expected horizon in its house and with the correlation in housing costs in future locations. Empirically, we find that both house prices, relative to rents, and the probability of homeownership increase with net rent risk.

Date: 2005
References: Add references at CitEc
Citations: View citations in EconPapers (390)

Downloads: (external link)
http://hdl.handle.net/10.1093/qje/120.2.763 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Owner-occupied housing as a hedge against rent risk (2005)
Working Paper: Owner-Occupied Housing as a Hedge Against Rent Risk (2003)
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:oup:qjecon:v:120:y:2005:i:2:p:763-789.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

The Quarterly Journal of Economics is currently edited by Robert J. Barro, Lawrence F. Katz, Nathan Nunn, Andrei Shleifer and Stefanie Stantcheva

More articles in The Quarterly Journal of Economics from President and Fellows of Harvard College
Bibliographic data for series maintained by Oxford University Press ().