EVIDENCE ON THE DEMAND FOR MORTGAGE DEBT BY OWNER-OCCUPANTS

This paper explores the relationship between household mortgage debt b urdens and housing consumption, periodic income, nonhousing wealth, th e income tax position of the household, expected mobility, and other m icro-level characteristics that proxy for household risk preferences a nd life cycle-effects. We use 1985 and 1989 American Housing Survey da ta to estimate mortgage debt level equations simultaneous with house v alue equations, controlling for the contemporaneous nature of these tw o choices. We find that larger debt levels are positively associated w ith greater value residences and with the level of household income. N umerous household level demographic characteristics are also systemati cally related to mortgage demand. Of particular interest are our findi ngs that the use of mortgage debt is affected significantly by the rat e of tax savings on mortgage interest deductions and by the expected m obility of the household, (C) 1998 Academic Press.