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Getting on and Moving Up the Property Ladder: Real hedging in the U.S. Housing Market Before and After the Crisis

Damianov, Damian S.; Escobari, Diego

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Authors

Diego Escobari



Abstract

Real hedging is the practice of getting onto the property ladder in order to trade up to a larger home in the future. We define the value of the real hedge of home ownership as the difference between the risk premiums of renting and owning and explore how this value depends on local housing price dynamics and household characteristics. Controlling for the potential endogeneity of housing bubble bursts across different U.S metropolitan areas, we find a significantly higher correlation in the appreciation rates across the Standard & Poor's Case‐Shiller tiered house price indices in the period after the housing crisis. We conclude that real hedging has become more attractive in the period after the crisis, particularly in markets exhibiting momentum and high volatility in returns.

Citation

Damianov, D. S., & Escobari, D. (2021). Getting on and Moving Up the Property Ladder: Real hedging in the U.S. Housing Market Before and After the Crisis. Real Estate Economics, 49(4), 1201-1237. https://doi.org/10.1111/1540-6229.12276

Journal Article Type Article
Online Publication Date Mar 14, 2019
Publication Date 2021
Deposit Date Feb 19, 2019
Publicly Available Date Mar 14, 2021
Journal Real Estate Economics
Print ISSN 1080-8620
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 49
Issue 4
Pages 1201-1237
DOI https://doi.org/10.1111/1540-6229.12276
Public URL https://durham-repository.worktribe.com/output/1302996

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Copyright Statement
This is the accepted version of the following article: Damianov, Damian S. & Escobari, Diego (2021). Getting on and Moving Up the Property Ladder: Real hedging in the U.S. Housing Market Before and After the Crisis. Real Estate Economics 49(4): 1201-1237, which has been published in final form at https://doi.org/10.1111/1540‐6229.12276. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.





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