To Buy or Not to Buy: Consumer Constraints in the Housing Market

We use a strategic household survey to study the sensitivity of intended homeownership decisions to financing constraints. We find that the average stated likelihood of buying a home is strongly sensitive to the size of the required down payment, which we vary exogenously across three scenarios. Thi...

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Bibliographic Details
Published in:	The American economic review Vol. 106; no. 5; pp. 636 - 640
Main Authors:	Fuster, Andreas, Zafar, Basit
Format:	Journal Article
Language:	English
Published:	Nashville American Economic Association 01-05-2016
Subjects:	Analysis Central banks Consumer behavior Cost control Decision making Discount rates Down payments Economic theory Home ownership HOMEOWNERSHIPAND THE AMERICAN DREAM Housing Inheritances Mortgage rates Personal finance Polls & surveys Preferences Probability Studies Willingness to pay United States > US
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Summary:	We use a strategic household survey to study the sensitivity of intended homeownership decisions to financing constraints. We find that the average stated likelihood of buying a home is strongly sensitive to the size of the required down payment, which we vary exogenously across three scenarios. This sensitivity is particularly high for respondents that appear more liquidity constrained based on observable characteristics (including current renters, or owners with low savings or low home equity). For renters, expectations of future rent inflation and of improvements to their personal financial situation also predict intention to buy.
ISSN:	0002-8282 1944-7981
DOI:	10.1257/aer.p20161086