HOME MORTGAGE DEBT FINANCING OF NONHOUSING INVESTMENTS

Home mortgage debt is decomposed into a component that represents debt demand, derived from housing demand and a residual excess demand. Thi s excess demand derives principally from the demand for nonhousing ass ets. An empirical model of the determinants of the demand for excess d ebt is specified and estimated using databases from the 1983 and 1986 Surveys of Consumer Finance. The estimations focus on evidence of link ages between debt demand and household preferences for illiquid risky assets, and on the substitutability of personal debt for mortgage debt . Positive linkages are found between household choices of investments in vacation homes, investment real estate, and closely held business and the demand for excess debt. However, personal debt and mortgage de bt appear to have largely separate financing roles.