Mortgage Market, Housing Tenure Choice and Unemployment

Posted: 6 Oct 2016

See all articles by Gaetano Lisi

Gaetano Lisi

University of Cassino - Department of Economic Sciences

Date Written: October 5, 2016

Abstract

Following the evidence that housing costs may impair the proper functioning of the labour market, this paper develops a search and matching model where trading frictions in the mortgage, housing and labour markets interact with each other. Precisely, the employment status affects the probability to get a mortgage. In turn, the granting or not of the mortgage affects the housing tenure choice (tenancy or owner occupancy). Finally, the housing tenure choice affects the unemployment rate. It will show that tenants generate a greater effort in searching for a job than homeowners, since employed workers have a greater chance of getting a mortgage to buy a home. As a result, the positive correlation between the homeownership and unemployment rates emerges as quite consistent with the evidence that homeowners tend to be unemployed less often than tenants.

Keywords: Search and matching frictions; Mortgage market; Housing costs; Housing tenure choice; Search intensi

JEL Classification: G21, J64, R21, R31

Suggested Citation

Lisi, Gaetano, Mortgage Market, Housing Tenure Choice and Unemployment (October 5, 2016). Journal of Real Estate Finance and Economics, Vol. 53, No. 4, 2016, Available at SSRN: https://ssrn.com/abstract=2848410

Gaetano Lisi (Contact Author)

University of Cassino - Department of Economic Sciences ( email )

Cassino
Italy

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