Working Paper: NBER ID: w5629
Authors: Donald R. Haurin; Patric H. Hendershott; Susan M. Wachter
Abstract: This paper describes the real wealth accumulation of American youth and relates this behavior to variations in real constant-quality house prices in their localities of residence. We argue that increases in the real constant-quality house price have two offsetting effects on wealth. First, the greater the local constant-quality price of housing, the greater the wealth needed to meet the lender imposed down payment constraint if housing demand is price inelastic. However, increased real constant-quality house price reduces the likelihood of home ownership and thus the desire the accumulate wealth needed for a down payment. Using a panel data set for youth age 20-33 for the years 1985 through 1990 we find that the combined direct and indirect impact of variations in real constant-quality house price on wealth is modest for changes near the average real house price, but youths' wealth declines substantially in areas with high real house price.
Keywords: home ownership; wealth accumulation; housing prices; youth
JEL Codes: D31; R21; R31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| real constant-quality house prices (R31) | wealth accumulation (E21) |
| real constant-quality house prices (R31) | desire to accumulate wealth (E21) |
| desire to accumulate wealth (E21) | wealth accumulation (E21) |
| real constant-quality house prices (R31) | home ownership (R21) |
| home ownership (R21) | wealth accumulation (E21) |