THE DEMAND FOR HOUSING: APPLICATION OF A PORTFOLIO-BALANCE MODEL.

摘要

This thesis provides a model of the demand for housing within a portfolio-balance framework. In this framework, the housing choice is jointly determined by the consumption and investment decisions that the household makes in order to maximize utility derived from its returns on assets, subject to the wealth constraint. With some reasonable assumptions about marginal utility of consumption, interest rate on housing mortgage, and the effect of the U.S. income tax, the model predicts that the demand for housing is determined by labor income, wealth, and the price of housing.; The estimation of the model was based on a cross-sectional sample and the use of heteroscedastic tobit analysis. The sample consists of home owners as 66 percent and non-home owners as 34 percent. Thus, without any separation of the data, an estimation technique such as the tobit analysis seemed to be appropriate for the treatment of the truncation in the sample. On the other hand, a test for homoscedasticity confirmed the presence of heteroscedasticity and its effects on the results. Therefore, a heteroscedastic tobit analysis was utilized to get consistent and unbiased estimates of the housing demand function.; The thesis argues that the estimation of the income elasticity of the demand for housing based on labor income and wealth will improve and increase the estimate of the elasticity. The standard approach of using total or permanent total income, because of the simultaneous equations bias, underestimates the value of the income elasticity. A comparison between the two methods revealed that the estimate of the income elasticity based on labor income and wealth is higher than that based on total or permanent total income. Thus, although the methods are similar in measuring the income elasticity, their estimates of this elasticity are found to be different.; The results reported in the thesis are likely to be biased due to the lack of data on the housing price index, and hence its omission from the estimates of the housing demand function. The magnitude and direction of the bias depend on the sum of the housing price variations among the cities and regions of the U.S.A. from where the sample was drawn.