The Missing Homebuyers: Regional Heterogeneity and Credit Contractions

46 Pages Posted: 24 Jan 2021 Last revised: 26 Jun 2023

See all articles by Pierre Mabille

Pierre Mabille

INSEAD - Finance; Centre for Economic Policy Research (CEPR)

Date Written: June 26, 2023

Abstract

This paper documents an unprecedented decrease in young homeownership since the Great Recession driven by regions with high house prices. Using a panel of U.S. metro areas, I calibrate an equilibrium spatial macro-finance model with overlapping generations of mobile households. The dynamics of regional housing markets is explained by an aggregate credit contraction with heterogeneous local impacts rather than by local shocks. Lower millennial income and wealth amplify its effect. The impact of subsidies to first-time buyers is dampened, because they fail to stimulate regions that suffer from larger busts. Place-based subsidies achieve larger gains.

Keywords: Spatial macro-finance, home ownership, first-time buyers, mortgages, credit standards, house prices, Millennials

JEL Classification: E21, G11, G21, G51, J11, R30

Suggested Citation

Mabille, Pierre, The Missing Homebuyers: Regional Heterogeneity and Credit Contractions (June 26, 2023). INSEAD Working Paper No. 2023/31/FIN, Available at SSRN: https://ssrn.com/abstract=3742064 or http://dx.doi.org/10.2139/ssrn.3742064

Pierre Mabille (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
France

HOME PAGE: http://www.pierremabille.com

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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