Abstract
Using micro data from the 1983 Survey of Consumer Finances this paper shows that the illiquidity of housing has a strong negative effect on the equity–value ratio and the relative share of housing equity in total wealth. The behavior of movers when compared to that of non-movers produces some support for the hypothesis that movers are rationed in their holdings of mortgage debt, while over time wealth portfolio considerations prevail. Furthermore, the relative share in total wealth of real estate other than principal residences increases with wealth, but that of net equity in principal residences decreases. Access to professional investment advice, having accounts with stockbrokers, willingness to take risks and to remain illiquid all have negative effects on the housing share, and positive ones on that of net financial wealth. Earned income is an important determinant of the relative share of financial assets only.
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