On the Choice to Rent or Own a House by Stefano Corradin
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On the Choice to Rent or Own a House

On the Choice to Rent or Own a House


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About the Book

This book focuses on the choice of owning versus renting. A life-cycle framework is proposed, where a finitely lived risk averse agent can choose between owning and renting a house, and is exposed to two sources of uncertainty: house price and labor income. The first chapter analyzes two alternatives for renting a given house: (i) a long term fixed-price rent contract, and (ii) a rent contract that is fully adjustable to house prices. Alternatively, the agent can buy the house borrowing at the risk free rate. The equilibrium long term fixed-price rent and the adjustable rent are derived, such that the agent is indifferent ex ante between owning and renting. The second and the third chapter investigate how the choice of owning a house is affected by taking a mortgage contract that has a risk of default. Lenders price the mortgage, charging a default premium to compensate themselves for expected losses due to default on the mortgage. As a result, the cost of mortgage has a major impact on the owning decision. Moreover, the adjustable rent is derived, such that the agent is indifferent ex ante between owning and renting.


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Product Details
  • ISBN-13: 9783639134858
  • Publisher: VDM Verlag
  • Binding: Paperback
  • Language: English
  • Returnable: N
  • Weight: 177 gr
  • ISBN-10: 3639134850
  • Publisher Date: 05 Apr 2009
  • Height: 229 mm
  • No of Pages: 80
  • Spine Width: 5 mm
  • Width: 152 mm


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