Housing Price Volatility and Downsizing in Later Life

64 Pages Posted: 16 Oct 2007 Last revised: 18 Nov 2022

See all articles by James W. Banks

James W. Banks

Institute for Fiscal Studies; The University of Manchester

Richard W. Blundell

UCL; Centre for Economic Policy Research (CEPR)

Zoé Oldfield

Institute for Fiscal Studies (IFS)

James P. Smith

RAND Corporation; IZA Institute of Labor Economics

Date Written: October 2007

Abstract

In this paper, we modeled several types of housing transitions of the elderly in two countries -- Britain and the United States. One important form of these transitions involves downsizing of housing consumption, the importance of which among older households is still debated. This downsizing takes multiple forms, including reductions in the number of rooms per dwelling and the value of the home. There is also evidence that this downsizing is greater when house price volatility is greater and that American households try to escape housing price volatility by moving to places that are experience significantly less housing price volatility. Our comparative evidence in suggests that there is less evidence of downsizing in Britain. Our results indicate that housing consumption appears to decline with age in the US, even after controlling for the other demographic and work transitions associated with age that would normally produce such a decline. No such fall in housing consumption is found in Britain, largely because British households are much more likely to stay in their original residence.

Suggested Citation

Banks, James W. and Blundell, Richard W. and Oldfield, Zoe and Smith, James P., Housing Price Volatility and Downsizing in Later Life (October 2007). NBER Working Paper No. w13496, Available at SSRN: https://ssrn.com/abstract=1021974

James W. Banks

Institute for Fiscal Studies ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

The University of Manchester

Oxford Road
Manchester, N/A M13 9PL
United Kingdom

Richard W. Blundell

UCL ( email )

Department of Economics
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London, WC1E 6BT
United Kingdom
+44 20 7504 5863 (Phone)
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HOME PAGE: http://www.ucl.ac.uk/~uctp39a/

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Zoe Oldfield

Institute for Fiscal Studies (IFS) ( email )

7 Ridgmount Street
London, WC1E 7AE
United Kingdom

James P. Smith

RAND Corporation ( email )

P.O. Box 2138
1776 Main Street
Santa Monica, CA 90407-2138
United States

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

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