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Insights in the Economics of Aging$
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David A. Wise

Print publication date: 2017

Print ISBN-13: 9780226426679

Published to Chicago Scholarship Online: September 2017

DOI: 10.7208/chicago/9780226426709.001.0001

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PRINTED FROM CHICAGO SCHOLARSHIP ONLINE (www.chicago.universitypressscholarship.com). (c) Copyright University of Chicago Press, 2021. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in CHSO for personal use.date: 20 September 2021

House Price Volatility and the Housing Ladder

House Price Volatility and the Housing Ladder

Chapter:
(p.87) 3 House Price Volatility and the Housing Ladder
Source:
Insights in the Economics of Aging
Author(s):

James Banks

Richard Blundell

Zoë Oldfield

James P. Smith

James Banks

Richard Blundell

Zoë Oldfield

James P. Smith

Publisher:
University of Chicago Press
DOI:10.7208/chicago/9780226426709.003.0004

This paper investigates the effects of spatial housing price risk on housing choices over the first half of the life-cycle. Housing price risk can be substantial but, unlike other risky assets which people can avoid, most people want to eventually own their home thereby creating an insurance demand early in life. Our contribution focuses on the importance of home ownership as a hedge against future house price risk for individuals that plan to move up the housing ladder. We use a simple theoretical model to show that people living in places with higher housing price risk should own their first home at a younger age, live in larger homes, and be less likely to refinance. These predictions are shown to hold using panel data from the United States and United Kingdom.

Keywords:   housing, price risk, ownership, upsizing, housing ladder, family size, Britain, America

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