Real Estate Papers

Document Type

Journal Article

Date of this Version

5-2013

Publication Source

American Economic Journal: Economic Policy

Volume

5

Issue

2

Start Page

282

Last Page

312

DOI

10.1257/pol.5.2.282

Abstract

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/Permission Statement

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.

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Date Posted: 27 November 2017

This document has been peer reviewed.