Perception of House Price Risk and Homeownership" with Manuel Adelino, and Antoinette Schoar

Abstract:

This paper shows that while a majority of US households (71%) believes that housing is a “safe” investment, renters are much more likely to perceive housing as risky. Current housing decisions as well as future intentions to buy versus rent are strongly correlated with perceptions of house price risk. Households’ exposure to housing risk due to financial constraints, expected mobility or labor income risk are important factors for housing choices but do not mitigate the impact of risk perceptions. Finally, renters are slower to update beliefs about the riskiness of housing in response to past (local) house price changes