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Saving up or settling down: home ownership over the life cycle

Authors: Jonathan Halket and Santhanagopalan Vasudev
Date: 01 July 2013
Type: Journal Article, Review of Economic Dynamics, Forthcoming

Abstract

In a Bewley model with endogenous price volatility, home ownership and mobility across locations and jobs, we assess the contribution of financial constraints, housing illiquidities and house price risk to home ownership over the life cycle. The model can explain the rise in home ownership and fall in mobility over the life cycle. While some households rent due to borrowing constraints in the mortgage market, factors that affect propensities to save and move, such as risky house values and transactions costs, are equally important determinants of the ownership rate.

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