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Title: Tracking Homeownership Rates Over the Past Four Decades: The Interplay of Housing Costs, Mortgage Lending Standards and College Debt Burdens

Citation Type: Conference Paper

Publication Year: 2007

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Abstract: After temporarily rising during the subprime boom, U.S. homeownership rates plunged for young households before slowly rising in the late 2010s. We identify four key drivers of the homeownership rate of the young. The first is the relative cost of owning versus renting. The second is the severity of mortgage credit constraints, which delay the transition to homeownership. The role of credit constraints predated the subprime boom but became prominent in the wake of the subprime boom and bust. The third factor encompasses secular changes in family structure, proxied by the age when mothers first give birth. A fourth factor is the rising burden of student debt that has delayed the accumulation of downpayments and the transition to homeownership. We create a novel dataset of the average debt service burden ratio from the early 1980s on for each age cohort. Using a cointegrating model framework, we find that all four factors are significant drivers of the homeownership rate of young households, and that not accounting for college debt gives rise to omitted variable bias. Our study makes two contributions. First, we provide new time series data on the evolution of college debt service burdens. Second, we develop time series models of homeownership that jointly analyze the impact of access to credit, student debt, family factors, and the cost of owning to renting.

Url: https://iariw.org/wp-content/uploads/2024/08/Homownership-2024-DanzigerDucaMurphy-IARIW-July-31.pdf

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Authors: Danziger, Jonah; Murphy, Anthony; Duca, John

Conference Name: IARIW

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Data Collections: IPUMS CPS

Topics: Housing and Segregation, Poverty and Welfare

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