Boom in, bust out: young households and the housing price cycle

Ortalo-Magné, François and Rady, Sven (1998) Boom in, bust out: young households and the housing price cycle. Financial Markets Group Discussion Papers (310). Financial Markets Group, The London School of Economics and Political Science, London, UK.

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Abstract

The UK experienced a major residential real estate boom-bust cycle from the mid-Eighties to the mid-Nineties, accompanies by unprecedented shifts in the owner occupancy rate of young households. Previous empirical analyses have pointed toward income changes and financial deregulation as the likely causes of this episode, with little to say about the differential effects on various age groups. We show that, in a life-cycle model with income heterogeneity and credit constraints, the observed co-movements of housing prices and owner occupancy rates can be explained as an equilibrium response to income and credit market shocks. Our findings suggest that the financial liberalisation of the early Eighties was crucial for the unparalleled increase in the owner occupancy rate of young households during the boom.

Item Type:	Monograph (Discussion Paper)
Official URL:	https://www.fmg.ac.uk/
Additional Information:	© 1998 The Authors
Divisions:	Financial Markets Group
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance
JEL classification:	E - Macroeconomics and Monetary Economics > E3 - Prices, Business Fluctuations, and Cycles > E32 - Business Fluctuations; Cycles G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages R - Urban, Rural, and Regional Economics > R2 - Household Analysis > R21 - Housing Demand
Date Deposited:	05 Jun 2023 23:04
Last Modified:	16 Sep 2023 00:02
URI:	http://eprints.lse.ac.uk/id/eprint/119134

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