Housing Markets and the Global Financial Crisis
Show Less

Housing Markets and the Global Financial Crisis

The Uneven Impact on Households

Edited by Ray Forrest and Ngai-Ming Yip

Housing markets are at the centre of the recent global financial turmoil. In this well-researched study, a multidisciplinary group of leading analysts explores the impact of the crisis within, and between, countries.
Buy Book in Print
Show Summary Details
You do not have access to this content

Chapter 2: Effects of the Recent Credit Cycle on Homeownership Rates Across Households: What We Know and What We Expect

Doug Duncan and Cesar Costantino


Doug Duncan and Cesar Costantino* INTRODUCTION After 1994, the homeownership rate in the USA departed from its historical secular pattern and increased from 64.0 percent in that year to a peak of 69.0 percent in 2004. Although it is currently trending down, the US homeownership rate is still above the levels recorded before 1998. This chapter summarizes its history and explains what factors are behind its recent behavior. Once a new household is formed, the decision to own versus to rent would be determined only by the relative cost of each alternative if the housing units were the same in location and characteristics, and there were no frictions in the credit markets. However, housing units are different in location and characteristics almost by definition. Moreover, in many cities rental housing often is very different than the rest of the housing inventory, and these differences end up affecting tenure choice. Finally, credit markets are not frictionless, thus households most often need to pass a number of screening tests, for example meeting credit-risk score requirements, and be ready to hold an equity position in the investment if they want to become homeowners. All these factors contribute to the tenure decision of a household. The aggregate homeownership rate is just the average across all households. If households were homogeneous, we would be able to infer directly the aggregate homeownership rate from any household’s tenure decision.1 Since they are not, the US homeownership rate is affected by the composition of the household population, which...

You are not authenticated to view the full text of this chapter or article.

Elgaronline requires a subscription or purchase to access the full text of books or journals. Please login through your library system or with your personal username and password on the homepage.

Non-subscribers can freely search the site, view abstracts/ extracts and download selected front matter and introductory chapters for personal use.

Your library may not have purchased all subject areas. If you are authenticated and think you should have access to this title, please contact your librarian.

Further information

or login to access all content.