Amortization requirements benefit well-off and hurt liquidity-constrained housing buyers

“Amortization Requirements Benefit Well-Off and Hurt Liquidity-Constrained Housing Buyers,” February 2018. Paper. Ekonomistas post (Swedish)


Mortgage amortization requirements further constrain liquidity-constrained new housing buyers and reduce their demand for housing. The reduced total demand for housing lowers housing prices. For sufficiently liquidity-constrained new buyers, the loss from the restricted demand dominates the gain from lower prices, and their welfare falls. Well-off new housing buyers without liquidity constraints gain from lower prices, and their welfare rises. For “old” housing buyers, meaning those that already own housing and are selling it to buy new housing, there is no average gain from lower prices. For liquidity-constrained old buyers, there is a loss from the restricted demand, and their welfare falls.