UC Riverside

Rising housing prices and falling fertility rates are two features of cities in industrialized countries. The impact of housing market shocks on family decisions concerning home purchase and childbearing is the center of the dissertation. The first two essays explore the relationships between the housing market conditions and the interdependence of family home purchase and childbearing decisions. The third essay provides a theoretical analysis of how an increase in home price uncertainty affects family saving and home-buying decisions.

The first essay empirically investigates how the local house price level and its recent growth affect the frequency and timing of family home-buying and childbearing events. Taking the American urban families in the Panel Study of Income Dynamics database as the sample, it finds that the timing of a childbearing event relative to the date of the family's entering homeownership is more responsive to house prices and their changes than is the frequency of fertility event. Recent house price appreciation has a considerably smaller impact on the home buying and childbearing decisions than the current house price level, while it disproportionately deters poor families from a home purchase.

The second essay extends the basic lifecycle-consumption model to treat homeownership and childbearing decisions by taking each event as a phase transition. Operating via an intertemporal budget constraint and a mortgage downpayment requirement, the analysis demonstrates the interdependence of the two decisions in a family's life course. It explores some comparative dynamic properties of the model.

The third essay explores how an increase in future house price uncertainty affects the probability of a home-renting individual buying a home in the next period. Applying the portfolio optimization theory, the model shows that how the form of the uncertainty growth and the home buyer's tastes towards risk affect its saving strategy and the probability of entering homeownership. It particularly identifies that the role of prudence, the third-order derivative of the utility function, is central to the effect of increased uncertainty on savings.