Boom In, Bust Out: Young Households and the Housing Price Cycle

Sven Rady
Authors registered in the RePEc Author Service: Francois Ortalo-Magne

FMG Discussion Papers from Financial Markets Group

Abstract: The UK experienced a major residential real estate boom-bust cycle from the mid-Eighties to the mid-Nineties, accompanied by unprecedented shifts in the owner occupancy rate of young households. Previous empirical analyses have pointed toward income changes and financial deregulation as the likely causes of this episode, with little to say about the differential effects on various age groups. We show that, in a life-cycle model with income heterogeneity and credit constraints, the observed co-movements of housing prices and owner occupancy rates can be explained as an equilibrium response to income and credit market shocks. Our findings suggest that the financial liberalisation of the early Eighties was crucial for the unparalleled increase in the owner occupancy rate of young households during the boom.

Date: 1998-11
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Citations: View citations in EconPapers (15)

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Related works:
Journal Article: Boom in, bust out: Young households and the housing price cycle (1999)
Working Paper: Boom in, bust out: young households and the housing price cycle (1998)
Working Paper: Boom In, Bust Out: Young Households and the Housing Price Cycle (1998)
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