Thomas P. Boehm

Tenure choice and expected mobility: A synthesis

Abstract This study employs a joint logit probability model to estimate the effects of a vector of independent variables on the households current tenure choice and expected mobility which are hypothesized to be simultaneously determined. In the empirical analysis it was found that the coefficient on the endogenous variables (tenure choice and expected mobility) is the most highly significant of all the coefficients estimated. In addition, in previous analyses the age of the household head has always exhibited a highly significant positive effect on the probability of ownership. However, in this analysis it is demonstrated that this age variable was acting as a proxy for the expected mobility and wealth of the household.

A Hierarchical Model of Housing Choice

The main objective of this paper is the construction of an expanded model of housing choice that includes not only tenure choice, which has traditionally been the subject of analysis, but also other housing characteristic choices. In this model the probability of the household making a given tenure choice is estimated at the first level of a choice hierarchy. The familys choices over dwelling size and quality are then estimated at succeeding levels of that hierarchy, conditionally on the choices which precede them. These conditional probabilities can be combined with the probability of tenure choice to produce eight joint probabilities of housing choice. In addition, for a particular household or group of households, we can determine the effect of a change in any of the systems variables on the probability of the families making a given housing choice. In the empirical section it is demonstrated that this model provides much greater insight than the conventional tenure choice study regarding the effects of income, relative prices, and other socioeconomic variables on the familys housing choices. Consequently, it is concluded that models of this type should provide a superior tool for designing effective housing policy.

The Improvement Expenditures of Urban Homeowners: An Empirical Analysis

This paper presents evidence on the factors influencing the housing improvement expenditures of urban homeowners. In comparison to prior work, a more completely specified model was estimated. In particular, variables measuring the price of inputs and neighborhood quality were included and found to have a statistically significant impact on the maintenance and improvement expenditures of central city homeowners.

Determinants of Bank Growth Choice

Abstract We study the determinants of bank growth in a two-stage logistic regression model. We first compare banks that branch, Bank Acquire, or Product Expand with banks that do not grow externally. Banks that are federally chartered, in states with higher income growth, and with higher labor prices are less likely to grow externally. Larger banks are more likely to grow externally. In the second stage, we study determinants of growth activity for banks that expand products, branch, or acquire other banks. Depending on the time period, bank structure, regulatory environment, performance, and balance sheet characteristics determine bank growth choices.

Is There Discrimination in Mortgage Pricing? The Case of Overages

We conduct an empirical investigation to explain observed differentials in mortgage overage pricing. Our analysis makes several contributions. First, we study an area of mortgage pricing that is little understood by consumers and has received little scrutiny in the literature. Second, we consider the impact of the market power of individual loan officers on overages paid by borrowers, particularly minorities. Third, we include a number of borrower and lender characteristics not available in previous analysis. Importantly, we introduce a new direct measure of the market power of individual loan officers. We also incorporate the interactive effects of loan officer market power and the race of the borrower in determining the rate of the mortgage loan. Through the use of these new variables and employing proprietary data from different branches of a nationwide mortgage lending institution, we conclude that the market power of the lender and the bargaining or negotiating ability of the borrower are important determinants of overages. We find that overages paid by minorities who purchase homes are larger than those paid by whites. Our evidence suggests that this is due to differences in the pools of borrowers rather than to racial discrimination. Indeed, tests show that the pool of refinancings is more homogeneous across races than the pool for purchases, and we find no differences by race for refinancings. We conclude that a more effective way to eliminate racial differences in overages is to pursue policies designed to increase the ability of minorities to bargain more effectively rather than to enact additional antidiscrimination laws.

Reverse Mortgages and Interest Rate Risk

We develop and apply a valuation model that quantifies the interest rate risk inherent in fixed-rate reverse mortgages. Consistent with intuition, our results show that the interest rate risk of a reverse mortgage is greater than that of either a typical coupon bond or a regular mortgage. Somewhat surprisingly, we find that this difference in interest rate risk is extremely large. In fact, the interest rate risk of a reverse mortgage often is several orders of magnitude greater than the interest rate risk of other fixed-income securities. Copyright American Real Estate and Urban Economics Association.

Rates and Race: An Analysis of Racial Disparities in Mortgage Rates

Abstract We use a model based on the 1991–2001 American Housing Survey to determine whether differences in mortgage rates among whites, blacks, and Hispanics are due to differences in the property and loan characteristics of the borrowers themselves or to racial differences in how those characteristics are priced into rates. We separate loans into major market categories and present decompositions to assess the differences and distinguish between them. Very little information on mortgage pricing has been generally available to researchers, and the literature that discusses what information there is has not used a scheme that allows rate differences to be classified by characteristics and pricing. We find that significant differentials are more likely in the conventional mortgage market. The largest occur among blacks, who pay a much higher annual percentage rate than whites for both purchases and refinancing. For government‐insured loans, Hispanics do slightly better than whites.

The Dynamics of Homeownership: Eliminating the Gap between African American and White Households

This article uses a sample of young renters from the Panel Study of Income Dynamics and a continuous-time econometric model to explore not only the initial tenure transition to first-time homeownership, but also subsequent possible tenure transitions to a second owned home, back to rental tenure and, indirectly, to a second owned home from rental tenure. Once estimated, the predicted probabilities of these transitions are used to calculate the probability of homeownership at various times for households in the sample. These estimates are done separately for African Americans and whites for two different 11-year time intervals, 1987–1997 and 1993–2003. A primary result is that if African American education, income, net wealth and savings behavior could be brought in line with that of white households the majority of the racial gap in homeownership could be eliminated in either time period.

Property Taxation and the Demand for Homeownership

The purpose of this article is to analyze the impact of an increase in the effective Abstract rate of property taxation on the probability of homeownership by individuals at different income levels residing within central city and suburban housing markets. A theoretical model is provided that indicates that an increase in the tax rate produces two opposing effects on the demand for homeownership: (1) due to the property tax deduction, the price of ownership declines relative to renting, and (2) the overall price of housing rises relative to the cost of non housing goods. The strengths of these effects are investigated by conducting a logit analysis of the probability of homeownership with data from the Panel Study of Income Dynamics. Results show that a tax rate increase reduces the probability of homeownership, especially for middle-income households.

Market Conditions and Housing Choices: A Comparison of Homeownership Across Three Decades

This paper uses information on out-of-pocket housing cost and house price appreciation along with the geo-coded version of the Panel Study of Income Dynamics to consider the differences in the impact of these and other variables on the tenure choices of sample households across three time periods, the 1970s, the 1980s, and the 1990s. Specifically, an extended continuous time probability model is used to examine household’s transitions from renting to owning, and subsequent possible transitions either back to rental tenure or to another owned home during our three observation periods. Coefficient estimates show that financial variables such as house price appreciation and out-of-pocket housing cost play an important role in determining all the transitions. In addition, the analysis demonstrates the interesting result that the cumulative likelihoods of homeownership derived from the model are consistently lower than the probabilities of an initial transition to homeownership from rental tenure during the observation period. Finally, the magnitude, and timing of the impact on homeownership of a policy experiment that eliminates the mortgage interest deduction are shown to differ substantially across the three decades.