Housing Equity Dynamics and Home Improvements
42 Pages Posted: 27 Apr 2017 Last revised: 31 Jan 2022
Date Written: April 15, 2017
Abstract
In this study, we examine the effect of housing equity position, measured using the loan-to-value (LTV) ratio, on the probability of home improvements. Using 2001-2011 data from the Panel Study of Income Dynamics (PSID), we find that a higher LTV ratio, in general, reduces the probability of home improvements. We also find that the probability of home improvements depends on the recent change of housing equity position and, more importantly, on the causes of the change. Probability of home improvements decreases more when a high LTV ratio is caused by falling house prices than when it is caused by equity extraction.
Keywords: Loan-To-Value Ratio, Home Improvements, Housing Equity
JEL Classification: D14, R31
Suggested Citation: Suggested Citation