The Impacts of Borrowing Constraints on Homeownership

Linneman, Peter; Wachter, Susan M.

The Impacts of Borrowing Constraints on Homeownership

The American Real Estate and Urban Economics Association (AREUEA), Reprinted from Journal of the American Real Estate and Urban Economics Association, Vol. 17, No. 4, pp. 389-402, Winter 1989

15 Pages Posted: 22 Dec 2009

See all articles by Peter Linneman

Peter Linneman

University of Pennsylvania - Real Estate Department

Susan M. Wachter

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

Date Written: December 21, 2009

Abstract

This paper utilizes micro data to directly quantify the impact of mortgage underwriting criteria on individual homeownership propensities. To determine whether a family is constrained by these criteria, the optimal home purchase price is estimated. The results indicate that wealth and income constraints both reduce homeownership propensities, with a stronger impact for wealth constraints. Mortgage market innovations of the early 1980s seem to have reduced these effects. The research indicates, however, that even in well-developed capital markets, the presence of borrowing constraints adversely affects homeownership propensities.

Keywords: Economics, Economic Development and Real Estate, Housing and Community Development

Suggested Citation: Suggested Citation

Linneman, Peter D. and Wachter, Susan M., The Impacts of Borrowing Constraints on Homeownership (December 21, 2009). The American Real Estate and Urban Economics Association (AREUEA), Reprinted from Journal of the American Real Estate and Urban Economics Association, Vol. 17, No. 4, pp. 389-402, Winter 1989, Available at SSRN: https://ssrn.com/abstract=1526724