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Title: Unemployment Risk and the Demand for Home Equity Lines of Credit

Citation Type: Miscellaneous

Publication Year: 2014

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Abstract: This paper analyzes how the frequency and predictability of facing spells of unemployment impacts households’ demand for home equity loans or lines of credit (HELOC). These devices represent a low transactions cost way of extracting stored home equity. Using American Community Survey 2003-2012 data, I find working age household heads whose occupational unemployment rates are significantly impacted by changes in GDP, or business cycle effects, are more likely to secure access to a HELOC. Estimated effects are strongest for younger individuals. For this group facing seasonality in employment, as measured by the spread between highest and lowest monthly unemployment rate factors, further increases their tendency to hold a HELOC. Evidence of these impacts on younger households’ probability of holding a HELOC is most robust when coupled with house price appreciation that likely lifts credit supply restrictions they may face. Results are consistent with consumption smoothing motives impacting the demand for HELOCs.

Url: https://nabreufa.expressions.syr.edu/wp-content/uploads/2014/09/NM_U-Risk-HELOC-Demand-11-14-14.pdf

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Authors: Mota, Nuno

Publisher: Department of Economics Syracuse University

Data Collections: IPUMS USA

Topics: Labor Force and Occupational Structure

Countries: United States