Housing Decision with Divorce Risk

Publikation: Working paperForskning

Resumé

We build a realistically calibrated life-cycle model of housing decisions under divorce risk. As observed in the data, our model predicts the recent increase in divorce rates leads to reduced homeownership rates. The event of a divorce negatively affects homeownership, and this effect is long-lasting. The risk of a divorce triggers a precautionary savings motive. However, this motive is weaker when individuals can invest in owner-occupied homes because homeowners’ higher savings partially substitute for precautionary savings. When young, the larger asset accumulation due to divorce-risk induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownership for middle-aged and older households when divorce risk goes up.
OriginalsprogEngelsk
Udgivelses stedMünchen
UdgiverMunich Personal RePEc Archive
Antal sider46
StatusUdgivet - 14 nov. 2018
NavnMPRA Paper
Nummer90090

Emneord

  • Household finance
  • Real estate
  • Life cycle
  • Divorce risk
  • Family economics

Citer dette

Fischer, M., & Khorunzhina, N. (2018). Housing Decision with Divorce Risk. München: Munich Personal RePEc Archive. MPRA Paper, Nr. 90090
Fischer, Marcel ; Khorunzhina, Natalia. / Housing Decision with Divorce Risk. München : Munich Personal RePEc Archive, 2018. (MPRA Paper; Nr. 90090).
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Fischer, M & Khorunzhina, N 2018 'Housing Decision with Divorce Risk' Munich Personal RePEc Archive, München.

Housing Decision with Divorce Risk. / Fischer, Marcel; Khorunzhina, Natalia.

München : Munich Personal RePEc Archive, 2018.

Publikation: Working paperForskning

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N2 - We build a realistically calibrated life-cycle model of housing decisions under divorce risk. As observed in the data, our model predicts the recent increase in divorce rates leads to reduced homeownership rates. The event of a divorce negatively affects homeownership, and this effect is long-lasting. The risk of a divorce triggers a precautionary savings motive. However, this motive is weaker when individuals can invest in owner-occupied homes because homeowners’ higher savings partially substitute for precautionary savings. When young, the larger asset accumulation due to divorce-risk induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownership for middle-aged and older households when divorce risk goes up.

AB - We build a realistically calibrated life-cycle model of housing decisions under divorce risk. As observed in the data, our model predicts the recent increase in divorce rates leads to reduced homeownership rates. The event of a divorce negatively affects homeownership, and this effect is long-lasting. The risk of a divorce triggers a precautionary savings motive. However, this motive is weaker when individuals can invest in owner-occupied homes because homeowners’ higher savings partially substitute for precautionary savings. When young, the larger asset accumulation due to divorce-risk induced precautionary savings enables households to buy homes earlier, whereas the presence of transaction costs leads to reduced homeownership for middle-aged and older households when divorce risk goes up.

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KW - Family economics

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KW - Real estate

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Fischer M, Khorunzhina N. Housing Decision with Divorce Risk. München: Munich Personal RePEc Archive. 2018 nov 14.