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Journal of Housing Economics

Volume 10, Issue 4 , December 2001, Pages 456-471

doi:10.1006/jhec.2001.0297 This Document

Copyright 2001 Elsevier Science (USA). All rights reserved. Abstract
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A Housing Career Perspective on Risk E-mail Article

Viggo Nordvik1

Norwegian Building Research Institute, P.O. Box 123, Blindern, Oslo, N-0314, Norwayf1

Received 19 March 2001. Available online 1 March 2002.

Abstract
The main question analyzed in the article is how uncertainty in the asset price of owner-
occupied housing capital affects user costs and consequently housing demand. The analysis
is performed within the framework of a dynamic model of planned housing careers. Owner-
occupied housing has a dual role as both an asset and a consumption gooda consumption
good both now and in the future. By holding owner-occupied housing capital, the risk
associated with future purchase of housing can be reduced. Taking account of this, it is
shown that the risk premium in the user cost is negative for consumers on a sufficient
increasing path of future housing consumption. Hence, the demand for owner-occupied
housing of a risk-averse consumer can be increasing in asset price volatility. This result is
contrary to the "conventional wisdom" in housing economics and can be identified only
within an analytical framework that takes account of the dynamic aspects of housing market
behavior.

Author Keywords: housing demand; moving costs; risk premiums; housing careers.

1 The article has benefited from constructive comments from one of the journal's referees. I
thank the Norwegian Research Council for the financial support that made the research on
which this article is based possible.

f1 Viggo.Nordvik@byggforsk.no

http://www.sciencedirect.com/science/article/B6WJR-458192T-2/2/d1c6ec9aabd7fb45766... 3/31/2006
ScienceDirect - Journal of Housing Economics : A Housing Career Perspective on Risk Page 2 of 2

Journal of Housing Economics This Document

Volume 10, Issue 4 , December 2001, Pages 456-471
Abstract
Abstract + References
PDF (72 K)
Actions
E-mail Article

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http://www.sciencedirect.com/science/article/B6WJR-458192T-2/2/d1c6ec9aabd7fb45766... 3/31/2006