We thank anonymous referees, Francesco Caselli, Morris Davis, François Ortalo-Magné, Filippo Scoccianti, and seminar participants at various institutions for their comments. We are grateful to Faisal Ahmed, Nishat Hasan, and Eric Vogt for excellent research assistance. Gervais gratefully acknowledges financial assistance from the ESRC for this project. The views expressed herein are those of the authors and do not necessarily represent those of the Federal Reserve Bank of Chicago or the Federal Reserve System. Please address correspondence to: Jonas D. M. Fisher, 230 South LaSalle Street, Chicago, IL 60604-1413, U.S.A. E-mail: firstname.lastname@example.org.
WHY HAS HOME OWNERSHIP FALLEN AMONG THE YOUNG?*
Article first published online: 29 AUG 2011
© (2011) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association
International Economic Review
Volume 52, Issue 3, pages 883–912, August 2011
How to Cite
Fisher, J. D. M. and Gervais, M. (2011), WHY HAS HOME OWNERSHIP FALLEN AMONG THE YOUNG?. International Economic Review, 52: 883–912. doi: 10.1111/j.1468-2354.2011.00653.x
Manuscript received July 2009; revised April 2010.
- Issue published online: 29 AUG 2011
- Article first published online: 29 AUG 2011
We document that home ownership of households with “heads” aged 25–44 years fell substantially between 1980 and 2000 and recovered only partially during the 2001–5 housing boom. The 1980–2000 decline in young home ownership occurred as improvements in mortgage opportunities seemingly made it easier to purchase a home. This article uses an equilibrium life-cycle model calibrated to micro and macro evidence to understand these developments. A trend toward marrying later mechanically lowers young home ownership after 1980. We show that the large rise in earnings risk that occurred after 1980 can easily account for the remaining decline in young home ownership.