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Credit constraints and the composition of housing sales. Farewell to first-time buyers?

Carozzi, Felipe (2015) Credit constraints and the composition of housing sales. Farewell to first-time buyers? SERC discussion papers, SERCDP0183. Spatial Economics Research Centre, London, UK.

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Abstract

During the housing bust of 2008–2009, home prices and transaction volumes fell across the entire United Kingdom. However, while the fall in prices was similar across housing types, transaction volumes fell more for homes at the lower end of the market. I document this fact and use an overlapping-generations model to relate it to the reduction in loan-to-value ratios by British banks and to derive additional predictions. As down-payment requirements increase, young households with scarce financial resources are priced out by older owners who retain their previous housing for renting when trading up. Recent changes in aggregate housing tenure as well as changes in the number of sales and rentals in areas with different age composition are consistent with the model predictions. The insights presented here inform recent policy discussions about reduced access to home ownership by the young.

Item Type: Monograph (Discussion Paper)
Official URL: http://www.spatialeconomics.ac.uk/
Additional Information: © 2015 The Author
Divisions: Spatial Economics Research Centre
Subjects: H Social Sciences > HC Economic History and Conditions
H Social Sciences > HG Finance
JEL classification: G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R30 - General
Sets: Research centres and groups > Spatial Economics Research Centre
Collections > Economists Online
Date Deposited: 15 Jan 2016 11:58
Last Modified: 15 Jan 2016 11:58
Projects: 269868
Funders: Economic and Social Research Council, Department for Business, Innovation & Skills, Welsh Government, European Commissions Seventh Research Framework Programme
URI: http://eprints.lse.ac.uk/id/eprint/65016

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