Monetary Policy and the Homeownership Rate

James Graham and Avish Sharma

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: How does monetary policy affect the homeownership rate? A monetary contraction may have contrasting effects on ownership due to rising interest rates, falling in-comes, and lower house prices. To investigate, we build a heterogeneous household life-cycle model with housing tenure decisions, mortgage ï¬ nance, and an exogenous stochastic process to capture the macroeconomic effects of monetary policy. Following a contractionary shock, homeownership initially falls due to rising mortgage rates, but rises over the medium term given falling house prices. We also show that differences in mortgage credit conditions, mortgage flexibility, and household expectations formation can amplify homeownership dynamics following a shock.

Keywords: homeownership; monetary policy; interest rates; house prices; heterogeneous households (search for similar items in EconPapers)
JEL-codes: E20 E52 R21 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2024-06
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mon and nep-ure
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Related works:
Working Paper: Monetary Policy and the Homeownership Rate (2024)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2024-43

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