Investment risk and the transition into homeownership

This paper investigates the extent to which house-price uncertainty affects the transition of renter households into homeownership. Using a 14-year household panel from the Panel Study of Income Dynamics during the years 1984-1997 and measures of the time-varying risk and return to owner-occupied housing, we estimate a Cox proportional hazard model of the effect of house-price volatility on the transition into homeownership. Results indicate that house-price uncertainty has a negative and dramatic impact on transitions into homeownership. In addition, we find that the low-wealth renters are particularly sensitive to house-price risk.