Speaker:  Gregor Schubert (UCLA)

Paper Title: The Impact of Cultural Preferences on Homeownership

Abstract: Homeownership has long been a core tenet of the American Dream, but this is not universal across countries. In this paper, we study homeownership decisions among a large and growing segment of the U.S. population: foreign born U.S. residents. We identify a new channel driving immigrants' selection into homeownership, cultural preferences for homeownership. We show that high homeownership in their country of origin (“HOCO”) has an effect on tenure choices for foreign-born U.S. residents: moving across the interquartile range of HOCO increases homeownership by 3ppt, significantly closing the native-foreign born homeownership gap. We show in a simple tenure choice model how higher cultural affinity can increase homeownership responses to credit supply shocks and test this prediction empirically. Using an exogenous credit shock based on county exposure to lenders that are increasing their mortgage lending nationally, we show that, in response to a 1 SD mortgage credit shock, above-median HOCO residents see an annual increase in their homeownership rate that is 0.2 ppt larger than below-median-HOCO groups (relative to a baseline transition rate of 0.34). These findings imply that country-of-origin-related preferences can change the impact of credit cycles and policies supporting homeownership which target historically marginalized groups.

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