TY - JOUR
T1 - Home Ownership, Household Leverage and Hyperbolic Discounting
AU - Ghent, Andra
N1 - Publisher Copyright:
© 2015 American Real Estate and Urban Economics Association.
PY - 2015/9/1
Y1 - 2015/9/1
N2 - I examine tenure and mortgage choice in an equilibrium model in which households make decisions as if they discount hyperbolically rather than exponentially. Overall, hyperbolic discounting does not seem to explain the high rates of home ownership or portfolio concentration in housing in the data. I then study the choice between mortgages that require a substantial down payment and mortgages that require no down payment. Allowing households access to no-down-payment mortgages exacerbates rather than mitigates the undersaving of hyperbolic discounters. However, even when households discount hyperbolically, welfare is higher when households have access to no-down-payment mortgages.
AB - I examine tenure and mortgage choice in an equilibrium model in which households make decisions as if they discount hyperbolically rather than exponentially. Overall, hyperbolic discounting does not seem to explain the high rates of home ownership or portfolio concentration in housing in the data. I then study the choice between mortgages that require a substantial down payment and mortgages that require no down payment. Allowing households access to no-down-payment mortgages exacerbates rather than mitigates the undersaving of hyperbolic discounters. However, even when households discount hyperbolically, welfare is higher when households have access to no-down-payment mortgages.
UR - http://www.scopus.com/inward/record.url?scp=84938552915&partnerID=8YFLogxK
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U2 - 10.1111/1540-6229.12090
DO - 10.1111/1540-6229.12090
M3 - Article
AN - SCOPUS:84938552915
SN - 1080-8620
VL - 43
SP - 750
EP - 781
JO - Real Estate Economics
JF - Real Estate Economics
IS - 3
ER -