Abstract
This paper examines the relationships among the desirability of home-ownership, price risks and the return of housing investment. It argues that price risks may undermine the desirability of ownership, using both a theoretical and an empirical approach. The theoretical model studies aspatially the equilibrium house prices in a two-good, pure exchange economy, where investors (consumers) differ in their level of risk aversion. It shows that larger price risks and higher level of risk aversion decrease the attractiveness of owning a house. The empirical component uses current status data and a proportional hazard model to show the effect of risks and returns on households' hazard rates to be owners. The implication points to the inadequacy of the conventional housing finance arrangements, which provide little help for households to diversify or hedge the risk of home-ownership.
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