The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects

46 Pages Posted: 7 Jul 2004 Last revised: 9 May 2015

See all articles by Jonathan S. Feinstein

Jonathan S. Feinstein

Yale School of Management

Daniel L. McFadden

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 1987

Abstract

Using Waves one through fifteen of the PSID data set, we investigate the pattern of housing mobility amongst the elderly. We focus especially on two issues: (1) Determining which household characteristics tend to increase the probability of a move; and (2) Whether elderly households systematically move to smaller, less expensive dwellings when they do move, and, if so, which characteristics make such "downsizing" particularly likely. We find that wealthier households are less likely to move and to downsize, and that changes in family composition or retirement status significantly increase the likelihood of a move. We do not find much evidence of imperfections in the housing market, or of pervasive liquidity constraints. Finally, we develop a Lagrange Multiplier test for unobserved heterogeneity amongst elderly households, and strongly reject the null hypothesis of homogeneity.

Suggested Citation

Feinstein, Jonathan S. and McFadden, Daniel L., The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects (December 1987). NBER Working Paper No. w2471. Available at SSRN: https://ssrn.com/abstract=227090

Jonathan S. Feinstein (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

Daniel L. McFadden

University of California, Berkeley - Department of Economics ( email )

549 Evans Hall #3880
Berkeley, CA 94720-3880
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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