Homeownership and Wealth among Low- and Moderate-Income Households


Using data from a set of low- and moderate-income homeowners who received prime mortgages through the Community Advantage Program panel and a matched set of renters, we assess the effect of sustained homeownership on net worth and components of net worth. In this article, our aim is to test the claim that, all else being equal, investing in and maintaining ownership of a home yield higher short-term increases in net worth and other measures of economic well-being than do renting and choosing other forms of investment and consumption. We attempt to isolate the effect of homeownership from the factors that cause both homeownership and increases in wealth using three matching approaches that address sample selection and endogeneity in the data. After balancing renters and owners on observed characteristics and adjusting for influential outlying cases, we find that low- and moderate-income homeowners experience greater short-run increases in net worth, assets, and nonhousing net worth than renters do. These findings are particularly interesting because the period of study coincides with the housing crisis, periods of shrinking home values, and declining equity in the housing market as a whole.

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