Enzo Cerletti, Banco Central de Chile

“Housing Wealth: The Role of Social Norms, Background Risks and Rental Markets”

Coautoreado con Ester Faia y Michael Haliassos.

Abstract: The determinants of housing wealth have received considerable attention over the last years, not least because of the subprime crisis in the US and the tendency to impose real estate taxes in response to the Eurozone fical crisis. Cross-country differences in housing investment are well explained by preferences as determined by culture and by institutional environments. We propose a theory of housing wealth using a life-cycle model with status preferences, housing wealth (subject to adjustment costs and minimum size), rental markets and collateral constraints on borrowing (occasionally binding). Our model matches well all the paths of households investment. Status accounts for the bulk of the housing investment.