Real Estate Papers

Document Type

Journal Article

Date of this Version

3-2012

Publication Source

Journal of Urban Economics

Volume

71

Issue

2

Start Page

244

Last Page

257

DOI

10.1016/j.jue.2011.11.001

Abstract

We show that the hedging benefit of owning a home reduces the variability of housing consumption after a move. When a current home owner’s house price covaries positively with housing costs in a future city, changes in the future cost of housing are offset by commensurate changes in wealth before the move. Using Census micro-data, we find that the cross-sectional variation in house values subsequent to a move is lower for home owners who moved between more highly covarying cities. Our preferred estimates imply that an increase in covariance of one standard deviation reduces the variance of subsequent housing consumption by about 11%. Households at the top end of the covariance distribution who are likely to have owned large homes before moving get the largest reductions, of up to 40% relative to households at the median.

Copyright/Permission Statement

© 2012. This manuscript version is made available under the CC-BY-NC-ND 4.0 license: http://creativecommons.org/licenses/by-nc-nd/4.0/

Keywords

housing, house price risk, mobility, consumption, volatility

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Date Posted: 27 November 2017

This document has been peer reviewed.