Housing Demand in Mexico

Posted: 9 Oct 2009

See all articles by Matias Fontenla

Matias Fontenla

University of New Mexico - Department of Economics

Fidel Gonzalez

Sam Houston State University - College of Business Administration - Department of Economics and International Business

Date Written: March 8, 2009

Abstract

This paper analyzes the components of housing demand in Mexico in the context of developing and developed nations. The case of Mexico is particularly interesting given that population and income dynamics, as well as current housing shortages, suggest that the demand for housing will significantly increase in the near future. We use micro-level data from market-based mortgages that originated during the period of 2002 to 2004 for 21 metropolitan areas in Mexico. We find the price elasticity of housing demand to be -0.3, lower than previous studies for developed countries and within the range for developing countries. Permanent income is a major component of housing demand, with an elasticity of 0.8. In contrast, temporary income has a very low elasticity of 0.04. The mortgage rate elasticity for 25-year mortgages is -0.39. We believe these results provide important information to policy makers and practitioners in Mexico and other developing nations.

Keywords: Housing demand, Mexico

JEL Classification: R21, R58

Suggested Citation

Fontenla, Matias and Gonzalez, Fidel, Housing Demand in Mexico (March 8, 2009). Journal of Housing Economics, Vol. 18, 2009. Available at SSRN: https://ssrn.com/abstract=1485609

Matias Fontenla

University of New Mexico - Department of Economics ( email )

1915 Roma NE/Economics Building
Albuquerque, NM 87131
United States

Fidel Gonzalez (Contact Author)

Sam Houston State University - College of Business Administration - Department of Economics and International Business ( email )

Huntsville, TX 77341-2118
United States

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