Borrowing Constraints and Housing Price Expectations in the Euro Area
40 Pages Posted: 8 Sep 2015
Date Written: June 30, 2015
This paper analyzes the importance of financial constraints on the home ownership decision of European households and their differential effect in periods of positive expectations of housing prices. We document that financial constraints are key drivers of the household home ownership decision being wealth constraints more relevant than income constraints. The wealth constraint is less binding under a scenario in which housing prices exhibit an upward trend.
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