Abstract
Compared to other forms of savings for old age, homeownership offers some advantages. Purchasing a home is similar to purchasing an annuity that would insure housing consumption. Moreover, the home may be seen as a secure asset in case of need and perceived as a substitute for the purchase of long term care insurance. It is also a family asset that may be transmitted to the next generation. These advantages are weighted against the drawbacks of over consumption in old age (for those who are house rich and cash poor), low portfolio diversification (the price risk may be important if all assets are in the home), and illiquidity (drawing equity in case of need is not easy).
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References
Artle, R., & Varaiya, P. (1978). Life cycle consumption and ownership. Journal of Economic Theory, 18, 35–58.
Henderson, J. V., & Ioannides, Y. M. (1983). A model of housing tenure choice. American Economic Review, 73, 98–111.
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© 2011 Springer-Verlag Berlin Heidelberg
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Angelini, V., Laferrère, A., Weber, G. (2011). Homeownership in Old Age at the Crossroad Between Personal and National Histories. In: Börsch-Supan, A., Brandt, M., Hank, K., Schröder, M. (eds) The Individual and the Welfare State. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-17472-8_7
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DOI: https://doi.org/10.1007/978-3-642-17472-8_7
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