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Borrowing Constraints and Homeownership over the Recent Cycle

Working paper #793
Arthur Acolin, Jesse Bricker, Paul S. Calem and Susan M. Wachter

This paper identifies for the first time the impact of borrowing constraints in the recent decline in homeownership rates. Using data from the Survey of Consumer Finance (SCF), we measure the combined impact of income, wealth and credit constraints on homeownership outcomes over time. It has been established that credit supply loosened during the 2004-07 period and then became considerably more restricted in the wake of the Great Recession. Homeownership has also declined. However, the impact of this tightening of credit on probability of individual households to become homeowners has not previously been estimated. Using estimations of borrowing constraints going back to 2001, we identify the impact of earlier period borrowing constraints compared to those of 2010-13 on population level U.S. homeownership rates. We find a substantially higher negative impact of being borrowing constraints on the likelihood to own in the 2010-13 period compared to the 2004-07 boom period but also compared to 2001.

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