Credit Impairment and Housing Tenure Choice

43 Pages Posted: 2 Dec 2008

See all articles by Paul S. Calem

Paul S. Calem

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Simon Firestone

Freddie Mac - Housing Analysis and Research

Susan M. Wachter

University of Pennsylvania - Wharton School, Department of Real Estate ; University of Pennsylvania - Finance Department

Date Written: October 3, 2008

Abstract

We analyze the relationship between underwriting standards and low-income homeownership rates using the 1979 National Longitudinal Survey of Youth. The survey respondents are a nationally representative sample of Americans mostly 40-48 years of age as of the most recent wave of the survey in 2004. Past research has identified credit impairment, wealth constraints, and income constraints as finance-related barriers to homeownership. Using a model of tenure choice, we find that absent all three constraints, the homeownership rate of low-income households in our sample would increase from 52.5 to 59.3 percent. Approximately half of this differential is attributable to households with impaired credit and those with 'thin-file status,' the lack of a substantial credit history.

Keywords: real estate, housing, barriers to homeownership, underwriting standards, credit history, low-income homeownership, choice of property tenure, property forms

JEL Classification: D12, K11, R20

Suggested Citation

Calem, Paul S. and Firestone, Simon and Wachter, Susan M., Credit Impairment and Housing Tenure Choice (October 3, 2008). U of Penn, Inst for Law & Econ Research Paper No. 08-31. Available at SSRN: https://ssrn.com/abstract=1310203 or http://dx.doi.org/10.2139/ssrn.1310203

Paul S. Calem

Federal Reserve Banks - Federal Reserve Bank of Philadelphia ( email )

Ten Independence Mall
Philadelphia, PA 19106-1574
United States

Simon Firestone

Freddie Mac - Housing Analysis and Research ( email )

Mailstop A96
8250 Jones Branch Drive
McLean, VA 22102
United States

Susan M. Wachter (Contact Author)

University of Pennsylvania - Wharton School, Department of Real Estate ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6330
United States
215-898-6355 (Phone)

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

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