Housing Habits and Their Implications for Life-Cycle Consumption and Investment

Holger Kraft, Claus Munk, Sebastian Wagner

Publikation: Working paperForskning


We set up and solve a rich life-cycle model of household decisions involving consumption of both perishable goods and housing services, stochastic and unspanned labor income, stochastic house prices, home renting and owning, stock investments, and portfolio constraints. The model features habit formation for housing consumption, which leads to optimal decisions closer in line with empirical observations. Our model can explain (i) that stock investments are low or zero for many young agents and then gradually increasing over life, (ii) that the housing expenditure share is age- and wealth-dependent, (iii) that perishable consumption is more sensitive to wealth and income shocks than housing consumption, and (iv) that non-housing consumption is hump-shaped over life.
UdgivelsesstedFrankfurt am Main
UdgiverJohann Wolfgang Goethe-Universität
Antal sider60
StatusUdgivet - 2015
NavnSAFE Working Paper


  • Habit formation
  • Life-cycle household decisions
  • Housing expenditure share
  • Consumption hump
  • Stock market participation
  • Renting vs. owning home
  • Human capital