Does Credit Quality Matter for Homeownership?

32 Pages Posted: 14 Dec 2003

See all articles by Irina Barakova

Irina Barakova

Government of the United States of America - Office of the Comptroller of the Currency (OCC)

Raphael W. Bostic

Federal Reserve Bank of Atlanta

Paul S. Calem

Federal Reserve Banks - Federal Reserve Bank of Philadelphia

Susan M. Wachter

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

Date Written: January 6, 2003

Abstract

In this study, we test for the role of credit quality as a factor in limiting access to homeownership. While micro-level household data on wealth and income are available for assessing income- and wealth-based constraints to homeownership, lack of data on household credit ratings has precluded evaluation of credit quality as a potential barrier to homeownership. The study, for the first time, measures the relative importance of credit-, income-, and wealth-based constraints and estimates how the effects of these constraints have evolved over the past decade. The results show that financing constraints continue to have an important impact on potential homebuyers. The wealth constraint has the largest impact, although its importance declined substantially during the 1990s. Credit quality based constraints have become more important barriers to homeownership during the 1990s, mostly reflecting an increase in the number of households with impaired credit quality. Thus, both wealth and credit constraints persist as barriers to the attainment of homeownership.

Keywords: Credit quality, homeownership, barriers to homeownership, household credit rating, financial constraints and homeownership

Suggested Citation

Barakova, Irina and Bostic, Raphael W. and Calem, Paul S. and Wachter, Susan M., Does Credit Quality Matter for Homeownership? (January 6, 2003). U of Penn Law & Econ Research Paper 03-40. Available at SSRN: https://ssrn.com/abstract=478603 or http://dx.doi.org/10.2139/ssrn.478603

Irina Barakova

Government of the United States of America - Office of the Comptroller of the Currency (OCC) ( email )

400 7th Street SW
Washington, DC 20219
United States

Raphael W. Bostic

Federal Reserve Bank of Atlanta

1000 Peachtree Street N.E.
Atlanta, GA 30309-4470
United States

Paul S. Calem

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

Ten Independence Mall
Philadelphia, PA 19106-1574
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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