Accelerating Inflation, Nonassumable Fixed-Rate Mortgages, and Consumer Choice and Welfare / Patric H. Hendershott, Sheng Cheng Hu.

Format:

Book

Author/Creator:

Hendershott, Patric H.

Contributor:

National Bureau of Economic Research.

Hu, Sheng Cheng.

Series:

Working Paper Series (National Bureau of Economic Research) no. w0755.

NBER working paper series no. w0755

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1981.

Summary:

This paper measures the impact of nonassumable, fixed-rate, long-term mortgage financing on household mobility and housing demand during a period of accelerating inflation (l965_71l). We calculate that typical households who bought houses during the l96l7l period and utilized this type of financing would not have moved until the 1975-77 period. And this is in spite of rising incomes and a sharp fail in the real rental price or user cost of housing. We conclude that the nonassumable, fixed-rate mortgage is largely responsible for bath sluggish housing demand in the l967-79 period and its surge in the 1976-79 period. Housing activity would have been far more stable had variable-rate mortgagee been employed. Finally, the enormous gap between current mortgage rates and those existing in the19705 and the resultant huge capital gains on existing mortgages does not bode well for housing activity in the near term future.

Notes:

Print version record

September 1981.