Renting versus Owning and the Role of Income Risk

The Case of Germany

    Research output: Working paperDiscussion paper

    Abstract

    In a world with complete markets and no transactions cost, the decision
    whether to rent or buy a home is separate from a household's professional
    income risk. If markets are incomplete and have frictions, however, profession-
    speci¯c income risk, regional house price risk, and mobility needs will interact
    and should a®ect the tenure mode choice. Using panel data fromWest Germany,
    we establish homogeneous profession groups and estimate their regional net
    income risk and regional mobility. We then examine the impact of the risk
    and mobility variables on the tenure mode decision at the aggregate and the
    individual household level. We ¯nd that the diversi¯cation potential of renting
    a®ects the tenure mode choice as do mobility needs.
    Original languageEnglish
    Place of PublicationBerlin
    PublisherHumboldt-Universität zu Berlin
    Number of pages54
    Publication statusPublished - Nov 2009

    Publication series

    NameSFB 649 Discussion paper
    No.2009-060
    ISSN (Print)1860-5664

    Fingerprint

    Income risk
    Germany
    Tenure
    Household
    Mode choice
    Panel data
    Rent
    House prices
    Price risk
    Complete markets
    Friction
    Transaction costs

    Keywords

    • tenure mode choice
    • background risk
    • household mobility

    Cite this

    Schulz, R., Wersing, M., & Werwatz, A. (2009). Renting versus Owning and the Role of Income Risk: The Case of Germany. (SFB 649 Discussion paper; No. 2009-060). Berlin: Humboldt-Universität zu Berlin.

    Renting versus Owning and the Role of Income Risk : The Case of Germany. / Schulz, Rainer; Wersing, Martin; Werwatz, Axel.

    Berlin : Humboldt-Universität zu Berlin, 2009. (SFB 649 Discussion paper; No. 2009-060).

    Research output: Working paperDiscussion paper

    Schulz, R, Wersing, M & Werwatz, A 2009 'Renting versus Owning and the Role of Income Risk: The Case of Germany' SFB 649 Discussion paper, no. 2009-060, Humboldt-Universität zu Berlin, Berlin.
    Schulz R, Wersing M, Werwatz A. Renting versus Owning and the Role of Income Risk: The Case of Germany. Berlin: Humboldt-Universität zu Berlin. 2009 Nov. (SFB 649 Discussion paper; 2009-060).
    Schulz, Rainer ; Wersing, Martin ; Werwatz, Axel. / Renting versus Owning and the Role of Income Risk : The Case of Germany. Berlin : Humboldt-Universität zu Berlin, 2009. (SFB 649 Discussion paper; 2009-060).
    @techreport{96502d45871d4c1280435dd1a153e38d,
    title = "Renting versus Owning and the Role of Income Risk: The Case of Germany",
    abstract = "In a world with complete markets and no transactions cost, the decision whether to rent or buy a home is separate from a household's professional income risk. If markets are incomplete and have frictions, however, profession- speci¯c income risk, regional house price risk, and mobility needs will interact and should a{\circledR}ect the tenure mode choice. Using panel data fromWest Germany, we establish homogeneous profession groups and estimate their regional net income risk and regional mobility. We then examine the impact of the risk and mobility variables on the tenure mode decision at the aggregate and the individual household level. We ¯nd that the diversi¯cation potential of renting a{\circledR}ects the tenure mode choice as do mobility needs.",
    keywords = "tenure mode choice, background risk, household mobility",
    author = "Rainer Schulz and Martin Wersing and Axel Werwatz",
    year = "2009",
    month = "11",
    language = "English",
    series = "SFB 649 Discussion paper",
    publisher = "Humboldt-Universit{\"a}t zu Berlin",
    number = "2009-060",
    type = "WorkingPaper",
    institution = "Humboldt-Universit{\"a}t zu Berlin",

    }

    TY - UNPB

    T1 - Renting versus Owning and the Role of Income Risk

    T2 - The Case of Germany

    AU - Schulz, Rainer

    AU - Wersing, Martin

    AU - Werwatz, Axel

    PY - 2009/11

    Y1 - 2009/11

    N2 - In a world with complete markets and no transactions cost, the decision whether to rent or buy a home is separate from a household's professional income risk. If markets are incomplete and have frictions, however, profession- speci¯c income risk, regional house price risk, and mobility needs will interact and should a®ect the tenure mode choice. Using panel data fromWest Germany, we establish homogeneous profession groups and estimate their regional net income risk and regional mobility. We then examine the impact of the risk and mobility variables on the tenure mode decision at the aggregate and the individual household level. We ¯nd that the diversi¯cation potential of renting a®ects the tenure mode choice as do mobility needs.

    AB - In a world with complete markets and no transactions cost, the decision whether to rent or buy a home is separate from a household's professional income risk. If markets are incomplete and have frictions, however, profession- speci¯c income risk, regional house price risk, and mobility needs will interact and should a®ect the tenure mode choice. Using panel data fromWest Germany, we establish homogeneous profession groups and estimate their regional net income risk and regional mobility. We then examine the impact of the risk and mobility variables on the tenure mode decision at the aggregate and the individual household level. We ¯nd that the diversi¯cation potential of renting a®ects the tenure mode choice as do mobility needs.

    KW - tenure mode choice

    KW - background risk

    KW - household mobility

    M3 - Discussion paper

    T3 - SFB 649 Discussion paper

    BT - Renting versus Owning and the Role of Income Risk

    PB - Humboldt-Universität zu Berlin

    CY - Berlin

    ER -