Date of this Version
American Economic Journal: Economic Policy
For households that face a possibility of moving across MSAs, the risk of home owning depends on the covariance of the sale prices of their current houses with the purchase prices of their likely future houses. We find empirically that households tend to move between highly correlated MSAs, significantly increasing the distribution of expected correlations in real house price growth across MSAs, and so raising the "moving-hedge" value of owning. Own/rent decisions are sensitive to this hedging value, with households being more likely to own when their hedging value is greater due to higher expected correlations and likelihoods of moving. JEL (D14, R21, R23, R31)
Copyright © 2013 by the American Economic Association.Sinai, Todd, and Nicholas Souleles. 2013. "Can Owning a Home Hedge the Risk of Moving?" American Economic Journal: Economic Policy, 5(2): 282-312.
Sinai, T., & Souleles, N. S. (2013). Can Owning a Home Hedge the Risk of Moving?. American Economic Journal: Economic Policy, 5 (2), 282-312. http://dx.doi.org/10.1257/pol.5.2.282
Date Posted: 27 November 2017
This document has been peer reviewed.