Homeowners' financial vulnerability over the house price cycle

Ruben Tarne ()
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Ruben Tarne: University of Groningen

No 216-2022, IMK Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: This paper investigates the dynamics of financial vulnerability of indebted homeowners over the housing cycle with an agent-based housing market model. The model is calibrated using UK micro data. I find that financial vulnerability is driven by previous period house purchases and by dissaving due to a wealth effect on consumption. While the first channel is more important in the upswing, the dissaving channel is more important at high price levels. A second finding is that current vulnerability is path-dependent on past purchases at high prices, as due to the wealth effect, these past purchases lead to temporary high consumption.

JEL-codes: C63 G51 R31 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2022
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:imk:wpaper:216-2022

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