Leverage and Elderly Homeowners’ Decisions to Downsize

Xun Bian

Housing Studies, 2016, vol. 31, issue 1, 20-41

Abstract: We study the effect of financial leverage, measured using the loan-to-value (LTV) ratios, on elderly homeowners’ decisions to downsize. Using a 1999--2011 sample of elderly homeowners from the Panel Study of Income Dynamics, we find that a higher LTV ratio increases the propensity to downsize. Elderly homeowners with higher LTV ratios are more likely to move into properties with fewer rooms, to move from single-family properties into multifamily properties, and to move into less expensive homes. Our point estimates suggest that on average, a 10 per cent increase in the LTV ratio is associated with a 7.7--9.7 per cent increase in the probability to downsize.

Date: 2016
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DOI: 10.1080/02673037.2015.1024203

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