EconPapers    
Economics at your fingertips  
 

Accelerating Inflation, Nonassumable Fixed-Rate Mortgages, and Consumer Choice and Welfare

Patric Hendershott and Sheng Cheng Hu

No 755, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper measures the impact of nonassumable, fixed-rate, long-term mortgage financing on household mobility and housing demand during a period of accelerating inflation (l965_71l). We calculate that typical households who bought houses during the l96l7l period and utilized this type of financing would not have moved until the 1975-77 period. And this is in spite of rising incomes and a sharp fail in the real rental price or user cost of housing. We conclude that the nonassumable, fixed-rate mortgage is largely responsible for bath sluggish housing demand in the l967-79 period and its surge in the 1976-79 period. Housing activity would have been far more stable had variable-rate mortgagee been employed. Finally, the enormous gap between current mortgage rates and those existing in the19705 and the resultant huge capital gains on existing mortgages does not bode well for housing activity in the near term future.

Date: 1981-09
Note: ME
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as Hendershott, Patric H. and Hu, Sheng Cheng. "Accelerating Inflation, Nonassumable Fixed-Rate Mortgages, and Consumer Choice and Welfare." Public Finance Quarterly, Vol. 10, No. 2, (April 1982).

Downloads: (external link)
http://www.nber.org/papers/w0755.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:0755

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w0755

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().

 
Page updated 2025-03-31
Handle: RePEc:nbr:nberwo:0755