You can take it with you: Proposition 13 tax benefits,residential mobility,and willingness to pay for housing amenities

The endogeneity of prices has long been recognized as the main identification problem in the estimation of marginal willingness to pay (MWTP) for the characteristics of a given product. This issue is particularly important in the housing market, since a number of housing and neighborhood features are unobserved by the econometrician. This paper proposes the use of a well defined type of transaction costs–moving costs generated by property tax laws–to deal with this type of omitted variable bias. California's Proposition 13 property tax law is the source of variation in transaction costs used in the empirical analysis. Beyond its fiscal consequences, Proposition 13 created a lock-in effect on housing choice because of the implicit tax break enjoyed by homeowners living in the same house for a long time. Its importance to homeowners is estimated from a natural experiment created by two amendments that allow households headed by an individual over the age of 55 to transfer the implicit tax benefit to a new home. Indeed, 55-year old homeowners have 25% higher moving rates than those of comparable 54 year olds. These transaction costs from the property tax laws are then incorporated into a household sorting model. The key insight is that because of the property tax laws, different potential buyers may have different user costs for the same house. The exogenous property tax component of this user cost is then used as an instrumental variable. I find that MWTP estimates for housing characteristics are approximately 100% upward biased when the choice model does not account for the price endogeneity.     

Population and house prices in the United Kingdom

Real house prices rise in the United Kingdom amid growing concern of an impending correction. The rate of household formation has increased with strong population growth, due to elevated rates of natural increase and net migration, and lack of growth in average household size, due to a rise in single‐person households with population ageing. This paper presents an overlapping generations model of housing, endogenous labour, savings and growth to analyse the effect of an increase in the household formation rate and speculative demand under rational expectations on house prices in a general equilibrium. We find that real house prices rise over time if the rate of household formation outstrips the rate of housing supply, but do not follow a speculative bubble path in the long run. The results explain why the upward trend in real house prices reflects market fundamentals and has continued despite population ageing as the number of working and retired households grows relative to the number of older people seeking to sell.     

Portfolio choice with internal habit formation: a life-cycle model with uninsurable labor income risk

Motivated by the success of internal habit formation preferences in explaining asset pricing puzzles, we introduce these preferences in a life-cycle model of consumption and portfolio choice with liquidity constraints, undiversifiable labor income risk and stock-market participation costs. In contrast to the initial motivation, we find that the model is not able to simultaneously match two very important stylized facts: a low stock market participation rate, and moderate equity holdings for those households that do invest in stocks. Habit formation increases wealth accumulation because the intertemporal consumption smoothing motive is stronger. As a result, households start participating in the stock market very early in life, and invest their portfolios almost fully in stocks. Therefore, we conclude that, with respect to its ability to match the empirical evidence on asset allocation behavior, the internal habit formation model is dominated by its time-separable utility counterpart.     

Modelling the demand for housing over the life cycle

We model individual demand for housing over the life cycle, and show the aggregate implications of this behaviour. Individuals delay purchasing their first home when incomes are low or uncertain. Higher house prices lead households to downsize, rather than to stop being owners. Fixed costs (property transactions taxes) have important impacts on welfare (a wealth effect) and house purchase decisions (substitution effect). In aggregate, positive house price shocks lead to consumption booms among the old but falls in consumption for the young, and reduced housing demand; positive income shocks lead to consumption booms among the young and increased housing demand.     

Household formation,housing prices,and public policy impacts

This paper specifies and estimates a model of housing demand that explicitly includes the decision of individuals to form independent households. Parameter estimates reveal a considerable response of headship rates not only to income but also to housing prices. Analysis of housing policies ignoring the endogeneity of household formation is thus potentially biased. The model is employed to evaluate the effects of a housing voucher program. Simulated responses indicate that such a program creates a substantial additional demand for housing due to its positive impact on the propensity of young and elderly persons to live independently.     

Life cycle and housing decisions: a comparison by age cohorts

The use of decomposition methodologies when the involved variable is continuous is not common in the literature. This article uses this methodology, together with other decomposition methodologies, to explain how age can influence on housing decisions. In particular, we use Spanish data to study whether the age of the householder plays a significant role in influencing household decisions with respect to housing tenure and demand. From the comparison of housing decisions between different groups of households classified by the age of the householders, we conclude that age plays the primary role in explaining the gap between households regarding tenure choice, while it shares its importance with other covariates of the model in the housing demand decision.     

Consumption over the life cycle: How different is housing?

Micro data over the life cycle show different patterns for consumption for housing and non-housing goods: The consumption profile of non-housing goods is hump-shaped, while the consumption profile for housing first increases monotonically and then flattens out. These patterns hold true at each consumption quartile. This paper develops a quantitative, dynamic, general equilibrium model of life-cycle behavior, that generates consumption profiles consistent with the observed data. Borrowing constraints are essential in explaining the accumulation of housing stock early in life, while transaction costs are crucial in generating the slow downsizing of the housing stock later in life.     

Moving costs, nondurable consumption and portfolio choice

The substantial adjustment cost for housing affects nondurable consumption and portfolio allocations, as well as the frequency of housing transactions. A simple theoretical model, roughly calibrated, is used to assess the quantitative impact of adjustment costs on those decisions. The impact on portfolios is found to be significant, suggesting that housing wealth should be useful in empirical studies of portfolio choice. The welfare loss from the transaction cost is also substantial. The effect on nondurable consumption is small, however, so adjustment costs can explain only a small part of the equity premium puzzle.     

A DYNAMIC MODEL OF HOUSING DEMAND: ESTIMATION AND POLICY IMPLICATIONS*

Using data from the PSID, we estimate a dynamic model of housing demand with nonconvex adjustment costs, credit constraints, and uncertainty about income and home prices. We simulate how consumer behavior responds to house price and income declines as well as tightening credit. In response to a negative home price shock, households early in the life cycle climb the housing ladder more quickly and invest more in housing assets due to the lower price. With a concurrent negative income shock, however, housing demand falls among young and middle aged households who stay in smaller homes rather than to trade up.     

中国城市自有多套住宅家庭的空间模式实证研究

第二住宅古已有之,而在当代中国出现了规模逐步扩大的趋势。自住房制度改革以来,中国城市家庭住房来源和产权发生了巨大变化,已经从计划经济时期的租赁公房为主转变成了多样化的住房来源和产权,并且出现了拥有多套住宅的现象。地理因素影响第二住宅的获得。运用2005年CGSS数据分析了我国城市自有多套住宅家庭的地理特征,直辖市和省会市辖区自有多套住宅城市家庭比重低于其他城市,人口规模在50万以下的城市比其他城市自有多套住宅比例高,一线、二线城市低于四线城市。将城市居民分为本地市民、城镇移民、农村移民家庭和其他,本地市民家庭和全体城市家庭地理特征一致,城镇移民家庭和农村移民家庭空间模式有所不同,并且本地市民比移民更可能自有多套住宅。运用LOGIT模型在控制了家庭收入、移民类型等社会经济特征之后,城市行政等级和人口规模、市场等级等地理因素依然是影响全体城市家庭和本地市民家庭自有多套住宅的重要因素。它实际上表示的是地方住房市场,特别是房价和低价住房资源可得性等方面的差异。     

收入差距、家庭可支配收入与商品房价格：基于广州市的实证研究

论文使用1998—2009年广州市商品房价格和城镇居民不同收入家庭可支配收入来分析房价与收入差距和家庭可支配收入之间的关系。实证检验发现,收入差距扩大为房价上涨的Granger原因,但是房价并不是收入差距的Granger原因。房价对低、中低收入户的家庭可支配收入有较大影响,而中、中高收入户的家庭可支配收入是房价上涨的主要推动力量,高收入家庭既促进了房价上涨同时也从中受益最大。政策制定应该依据房价与不同收入户的家庭可支配收入之间的关系而具体实施,不能一概而论。     

Estimating the weight of opportunity costs in housing consumption

Behavioural economics suggests that people tend to neglect or underweight opportunity costs. However, strong empirical evidence for the size of the underweighting appears to be largely absent from the literature. What are the weights people attach to opportunity costs relative to out-of-pocket costs? In this article, I estimate the weight of opportunity costs in probably the largest economic decision that households make: buying a house. I show that homeowners attach approximately twice as much weight to out-of-pocket costs of their housing consumption than to the opportunity costs associated with this.     

Household’s optimal mortgage and unsecured loan default decision

How do households make optimal borrowing and default decisions when they have the option to borrow in multiple ways? In this paper, I analyze households’ optimal mortgage and unsecured loan borrowing and default decisions in the context of the recent recession. I model households as able to default on mortgage debt to walk away from capital losses, at the price of foreclosure. However, a household can also default on unsecured debt to maintain its home, in exchange for a longer exclusion from credit markets following default. Depending on the costs of each alternative, financially constrained households exhibit heterogeneity in optimal default decisions.Next, I analyze how mortgage loan modification policies, after a sudden drop in house prices, affect household choices in the mortgage and unsecured loan markets. The quantitative exercise shows that the government-driven mortgage modification program, initiated in 2009, reduces the mortgage default rate by 0.27% points. However, this increases the unsecured loan charge-off rate by 0.66% points.     

AN EMPIRICAL STATIONARY EQUILIBRIUM SEARCH MODEL OF THE HOUSING MARKET*

This article specifies and estimates a computationally tractable stationary equilibrium model of the housing market. The model is rich and incorporates many of its unique features: buyers’ and sellers’ simultaneous search behavior, heterogeneity in their motivation to trade, transaction costs, a trading mechanism with posting prices and bargaining, and the availability of an exogenous advertising technology that induces endogenous matching. Estimation uses Maximum Likelihood methods and Multiple Listing Services data. The estimated model is used to simulate housing market outcomes when (a) the amount of information displayed on housing listings increases and (b) real estate agent’s commission rates change.     

不确定性下农村家庭食品消费的"习惯形成"检验

本文利用"习惯形成"(habit formation)假说来研究中国家庭食品消费行为的特征,并首次利用1989—2006年农村家庭微观面板数据进行实证分析,从而试图给出近年来农村居民储蓄率持续偏高、消费倾向持续偏低的一种新解释。对动态面板模型的系统广义矩估计结果显示,农村居民家庭的食品消费有显著的习惯形成效应,这一效应即使在考虑了家庭的"预防性动机"之后仍然是稳健的,并且它对消费的边际影响比预防性动机更为重要。但是本文估计出的"习惯形成"参数比用总量数据得到的习惯形成参数要小。     

Fertility and housing

Young households in Hong Kong face particularly steep increases in house prices and low fertility despite low gender wage gaps. The model of fertility and housing in this paper explains why fertility decline need not reverse as female wages rise relative to male wages where housing land is scarce. For given house prices, demand for children may rise with female relative wages if housing comprises a sufficiently large share of childrearing. If the user cost of housing falls with rising house prices then fertility also rises. For endogenous house prices, however, growth in wages and a burgeoning working age population raises the market price of housing. In turn, fertility no longer rises with female relative wages. The analysis provides a novel mechanism whereby high population support ratios depress fertility and the results fit recent evidence that house prices affect fertility.     

Tax,credit constraints,and the big costs of small inflation

This paper develops a heterogeneous‐agent overlapping generations model that examines how the neutrality of the tax system with respect to inflation depends on the price elasticity of the housing supply. The model, which endogenises house prices and rents, and which incorporates detailed tax regulations and bank‐imposed credit constraints, shows (a) inflation has large effects on the tenure arrangements of young households irrespective of the housing supply elasticity; and (b) inflation can improve the welfare of some low income young households if the supply is sufficiently elastic. The welfare costs of inflation are reduced by taxing real rather than nominal interest.     

中国居民消费需求不足原因研究——基于中国城乡分省数据

This paper uses Chinese urban and rural panel data for 30 provinces, autonomous regions and municipalities (except Tibet and Taiwan) on the consumption of Chinese urban and rural households in 1995–2005, by constructiong a random effect model, to analyze the impact of sources of household’s consumption demand on the Chinese economy. The quantitative analysis reveals that the per capita disposable income of households is highly relevant in explaining households’ per capita consumption expenditure, in these eleven years, and that China’s consumption function was fairly stable. On the basis of flow of funds accounts (barter transaction) data in 1992–2004, the paper further reveals that, since 1997–1998, China’s consumer demand remains in the doldrums because of the following distribution and redistribution process of the national income: The Government’s share of total income and disposable income is becoming ever larger, while the share of households is declining. Aside from the result that a rise in the burden of personal tuition has a negative impact on per capita consumption demand for urban households, we have not found that housing reform or medical expenses significantly reduce consumer demand in China. We believe that low household consumption demand is caused mainly by the income redistribution between households, government, and corporations rather than the inequality in income distribution across households.     

The loan structure and housing tenure decisions in an equilibrium model of mortgage choice

The objective of this paper is to understand how loan structure affects (i) the borrower's selection of a mortgage contract and (ii) the aggregate economy. We develop a quantitative equilibrium theory of mortgage choice where households can choose from a menu of long-term (nominal) mortgage loans. The model accounts for observed patterns in housing consumption, ownership, and portfolio allocations. We find that the loan structure is a quantitatively significant factor in a household's housing finance decision. The model suggests that the mortgage structure preferred by a household is dependent on age and income and that loan products with low initial payments offer an alternative to mortgages with no downpayment. These effects are more important when inflation is low. The presence of inflation reduces the real value of the mortgage payment and the outstanding loan over time reducing mobility. Changes in the structure of mortgages have implications for risk sharing.     

城市居民住房承受能力测度研究——剩余收入视角

借鉴扩展线性支出系统模型确定家庭食品、衣着、家庭设备用品及服务等非住房基本消费支出的基础上,运用剩余收入法测度了2003—2008年武汉市七种不同类型家庭的住房承受能力。剩余收入法测度结果能反映出不同类型家庭住房承受能力的具体差距,显示出武汉市中等偏下收入及以下收入家庭面临住房承受能力问题,并且收入越低住房承受能力问题越突出,结果比传统比率法更具有说服力。而比率法测度显示中等偏上户及以下家庭面临住房承受能力问题,扩大了存在住房承受能力问题的家庭范围。运用剩余收入法可以定量地测度各类家庭住房承受能力的大小和绝对差距,有助于确定城市中低收入家庭住房补贴的对象及标准,制定我国公共住房销售、租赁政府指导价格,促进完善住房保障政策。