NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Dynamics of Housing Demand by the Elderly: Wealth, Cash Flow, and Demographic Effects

Jonathan Feinstein, Daniel McFadden

NBER Working Paper No. 2471
Issued in December 1987
NBER Program(s):   AG

Using Waves one through fifteen of the PSID data set, we investigate the pattern of housing mobility amongst the elderly. We focus especially on two issues: (1) Determining which household characteristics tend to increase the probability of a move; and (2) Whether elderly households systematically move to smaller, less expensive dwellings when they do move, and, if so, which characteristics make such "downsizing" particularly likely. We find that wealthier households are less likely to move and to downsize, and that changes in family composition or retirement status significantly increase the likelihood of a move. We do not find much evidence of imperfections in the housing market, or of pervasive liquidity constraints. Finally, we develop a Lagrange Multiplier test for unobserved heterogeneity amongst elderly households, and strongly reject the null hypothesis of homogeneity.

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