Accounting for changes in the homeownership rate

Matthew Chambers (), Carlos Garriga () and Don Schlagenhauf

No 2007-034, Working Papers from Federal Reserve Bank of St. Louis

Abstract: After three decades of being relatively constant, the homeownership rate increased over the period 1994 to 2005 to attain record highs. The objective of this paper is to account for the observed boom in ownership by examining the role played changes in demographic factors and innovations in the mortgage market which lessened downpayment requirements. To measure the aggregate and distributional impact of these factors, we construct a quantitative general equilibrium overlapping generation model with housing. We find that the long-run importance of the introduction of new mortgage products for the aggregate homeownership rate ranges from 56 and 70 percent. Demographic factors account for between 16 and 31 percent of the change. Transitional analysis suggests that demographic factors play a more important, but not dominant, role the further away from the long-run equilibrium. From a distributional perspective, mortgage market innovations have a larger impact explaining participation rate changes of younger households, while demographic factors seem to be the key to understanding the participation rate changes of older households. Our analysis suggests that the key to understand the increase in the homeownership rate is the expansion of the set of mortgage contracts. We test the robustness of this result by considering changes in mortgage financing after World War II. We find that the introduction of the conventional fixed rate mortgage, which replaced balloon contacts, accounts for at least fifty percent of the observed increase in homeownership during that period.

Keywords: Home ownership; Mortgage loans (search for similar items in EconPapers)
Date: 2007
New Economics Papers: this item is included in nep-dge and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Journal Article: ACCOUNTING FOR CHANGES IN THE HOMEOWNERSHIP RATE (2009)
Working Paper: Accounting for changes in the homeownership rate (2007)
Working Paper: Accounting for Changes in the Homeownership Rate (2005)
Working Paper: Accounting for Changes in the Homeownership Rate (2004)
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