Home Ownership for Low-Income Households

Paper Summary:

This paper establishes a model to elucidate how low-income heads-of-households (LIHOH) decide to purchase a home. The paper explains that after the decision is made, the model will predict the outcome for the homeowners when certain variables are changed, such as interest rates and income. The paper then establishes a hypothesis, proposes a way to prove the hypothesis using social science work done in previous studies, and then examines the outcome. Next, the paper examines what additional evidence might be collected in new quantitative studies to bolster or challenge the hypothesis. This paper also argues that the boom in housing ownership in the United States during the 1990s was largely driven by lower-cost loans, rather than changes in consumer preferences amongst lower-income heads of household. The paper points out that recent interest rate rises and changes in the job prospects of low-income earners in the US should predict a lower rate of house ownership in the future.

Outline:
Introduction
Hypothesis
Methodology
Income
Expectations of Income Continuation
Previous Home Ownership
Down Payment
Interest Rates
ARM's (Adjustable Rate Mortgages)
Reverse Mortgages
Increasing Housing Prices
Non-Financial Home-Buying Incentives
Completing the Model's Assumptions
Results Analysis
Critiques of this Model
Need for Further Study
Conclusion

From the Paper:

"Heads of household in poor households--defined as up to two times the official US poverty level of $16,000 per household (2004) in the US, or $32,000 (DeNavas-Wait). The rate of home ownership has increased in this segment of the US population during the 1990's (Belsky E. S. and Duda 1-45). Although many LIHOH figures are clouded by the mix between Hispanic, Black and other lower-income classifications, the trend towards higher homeownership in the 1990's is clear. According to the Federal Reserve Survey of Consumer Finances, more than 55 percent of lower-income households held debt in 2004, up from 45% in 1989."

Sample of Sources Used:

• Bankrate.com. Mortgage Payment Calculator. 2007. 18 June 2007 <http://www.bankrate.com/brm/mortgage-calculator.asp?unroundedPayment=477.415295465454&loanAmount=100000.00&nrOfYears=30&nrOfMonths=360&interestRate=4.00&startMonth=5&startDay=18&startYear=2007&monthlyPayment=477.42&submit.x=0&submit.y=0&submit=Calculate&m>.
• Belsky E. S. and Duda, M. "Anatomy of the LOW-Income Homeownership Boom in the 1990s." Retsinas, N. P. and Belsky, E. S. Low Income Homeownership. Washington: Brookings Institution Press, 2002. 1-12.
• DeNavas-Wait, C., Proctor, B.D. and Lee, C. H. Income, Poverty and Health Insurance Coverage in the United States: 2004. Washington: US Census Bureau, 2005
• Duda, M. and Belsky, E. "Asset Appreciation, Timing of Purchases and Sales, and Returns to Low-Income Homeownership." Duda, M. and Belsky, E. Low-Income Homeownership. Boston: Harvard University Press, 2002. n.p.
• Knox, N. "43% of first-time home buyers put no money down." USA Today 7 January 2007: 1.

More papers on Home Ownership for Low-Income Households:

• Research Paper # 27249 : "Impediments to Health Care Access for Low Income Visible Minorities"
• Essay # 85984 : "Low Income Families "
• Term Paper # 134045 : "Consumer Choice and Low-Income Housing"

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