Abstract
Abstract This paper documents an unprecedented decrease in young homeownership since the Great Recession driven by regions with high house prices. Using a panel of U.S. metro areas, I calibrate an equilibrium spatial macro-finance model with overlapping generations of mobile households. The dynamics of regional housing markets is explained by an aggregate credit contraction with heterogeneous local impacts rather than by local shocks. Lower millennial income and wealth amplify its effect. The impact of subsidies to first-time buyers is dampened, because they fail to stimulate regions that suffer from larger busts. Place-based subsidies achieve larger gains. Authors have furnished an Internet Appendix, which is available on the Oxford University Press Web site next to the link to the final published paper online.
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