2008
Abstract:
Understanding the housing choices of the older households will grow in
importance as the baby boom generation starts to retire. This proposed analysis utilizes a
rich longitudinal data set (PSID) to provide insight into the reasons that older households
leave homeownership to become renters. Because of the richness of the data, this
analysis is able to control for life transitions, a household’s income and wealth, and
connection to one’s children in predicting when a homeowner will become a renter. The
results have important implications for the life cycle hypotheses and the relationship
between bequest motivated savings and housing tenure choice. We find that age is not
related directly to housing tenure choice for older households. Instead, having lower
health status and being a single head of household is an important predictor of housing
tenure transitions. At the same time, very few life changing events immediately lead a
homeowner to become a renter. Finally, living next to one’s children lowers the
probability of becoming a renter, and having richer children increases the probability of
becoming renter and therefore consuming one’s housing wealth.
