House Prices and the Decision to Save for Down Payments

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Abstract

This paper examines the responsiveness of renters′ decisions to save for home purchase to house prices. I use membership in a tax-deferred savings program for prospective first-time home buyers in Canada to identify renter households who are saving for a down payment. I find that high house prices substantially reduce the probability of households saving for a down payment: a $4000 increase in house prices decreases the probability of saving for a down payment by one percentage point. In addition, households saving for home purchase have $300 less in accumulated assets for every $1000 higher increment to house prices.

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ASJC Scopus subject areas

  • Economics and Econometrics

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