Homeownership and Housing Transitions: Explaining the Demographic Composition

Authors: Eunseong Ma, Sarah Zubairy Date: June 2019

Working Paper 1905 

The homeownership rate was relatively stable for the few decades preceding 1995, followed by a large increase between 1995-2005 and a subsequent decline over the next ten years. Authors Eunseong Ma and Sarah Zubairy document the evolution of homeownership rate across various age groups for the period 1995-2015. Two interesting empirical findings emerge. First, there are uneven variations in the homeownership rates across age: it is large for the young, but small for the old. Second, the total variation is mostly driven by renter-to-owner transitions of the young. The authors also consider a life-cycle model featuring housing tenure decisions to explain these empirical facts. The analysis suggests that a variation in the debt-to-income limit plays a crucial role in accounting for the overall rise in homeownership and the uneven behavior across age groups.

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Keywords: Homeownership rate, Debt-to-income constraint, Life-cycle model