This paper documents that the drop in young homeownership is more persistent among non-college graduates compared to college graduates: while some college graduates postpone home purchasing, non-college graduates are likely to remain long-term renters. I develop a model showing that the combination of rising college share and a widening education-driven income gap accounts for the delayed purchasing of college graduates and the lack of purchasing among non-college graduates. Exploiting cross-city variation, I verify the implications of the model and show that the mechanism can quantitatively account for the diverging ownership decisions between the two education groups from 1980 to 2019.

What is the contribution of demographic changes to housing prices? We answer this question by analyzing various channels through which changes related to demographics may affect aggregate housing demand and supply differently. Specifically, we focus on the changes in life expectancy, international immigration, urbanization and fertility. As these changes are sustainable and predictable, understanding the role they play in the real estate markets is important for predicting future housing prices. We develop and estimate a general equilibrium model to evaluate the contribution of these factors and find that they can account for 42.5% of the observed housing price growth from 1970 to 2010. Adopting the projection of these four factors provided by Census and the United Nations, we use our model to predict housing price through 2050. We find that the housing price will keep growing from 2010 to 2050 by 7.4% to 21.3%, depending on urbanization rates and the level of immigration.

We study the efficiency of bilateral liability-based contracts in managed security services (MSSs). We model MSS as a collaborative service with the protection quality shaped by the contribution of both the service provider and the client. We adopt the negligence concept from the legal profession to design two novel contracts: threshold-based liability contract and variable liability contract. We find that they can achieve the first best outcome when post breach effort verification is feasible. More importantly, they are more efficient than a multilateral contract when the MSS provider assumes limited liability. Our results show that bilateral liability-based contracts can work in the real world. Hence, more research is needed to explore their properties. We discuss the related implications. 

Motivated by the fact that most owners live in detached houses while most renters live in apartments, I explore the role of land use difference between houses and apartments in determining the distribution of prices and rents across U.S. cities. Difference in land intensities leads to different supply elasticity between owner-occupied and rental units which are reflected in prices and rents. I show that introducing different land intensities in standard housing-tenure choice model allows it to account for the joint distribution of prices and rents across cities and its dynamics over time.

Previously titled as ``Accounting for the Rise in Mortgage Debt: The Contribution of Inflation and Mortgage Innovations"

The past forty years saw a significant decline in inflation in most developed economies followed by a rise in household mortgage debt. In the U.S., the 5-year average of inflation fell from around 8\% in the 1980s to near 2 % by the 2000s and was followed by an increase in mortgage debt to GDP from less than 30% to 45% by the early 2000s. We show that with fixed amortization and fixed nominal payment mortgage contracts, a decline in inflation backloads real mortgage payment and mortgage debt. We develop a housing tenure choice model where the mortgage interest rate varies with inflation which is calibrated to key U.S. housing market moments. Permanent decreases (increases) in trend inflation increase (decrease) the steady state level of mortgage debt to income and lead to consumers buying larger (smaller) home. We examine transitions between steady states following an unanticipated change in inflation. We find that it takes a (very) long time -- 40-50 years -- for the economy to transition between steady states following a permanent change in trend inflation. Counterintuitively, the initial impact of a gradual (announced) decline in inflation from 7 to 2\% is larger than a sudden (one-period) transition. Transitory changes in inflation have larger short run impacts on mortgage debt and home ownership than a permanent change

Novel survey questions are used to quantify the non-pecuniary benefits of the geographic locations and job types considered by college graduates from hometowns that often lack substantial high-skilled job opportunities. The questions, which were inspired by the concept of compensating wage differentials, allow us to measure the full amount of non-pecuniary benefits in dollar equivalents. We find that fully taking into account non-pecuniary considerations is of fundamental importance for understanding post-graduation location decisions and for characterizing inequality in overall welfare.

We quantify the welfare cost of inflation associated with borrowing constraints which distort housing choice and consumption over the life-cycle. In our incomplete-market life-cycle model, mortgages are restricted to take the form of standard fixed amortization contracts. We analyze steady states where variations in inflation see a corresponding change in nominal interest rates and nominal wage growth. With standard mortgage contracts, higher rates of inflation tilt the real level of mortgage payments to earlier in the contract. Intuitively, with fixed amortization and fixed nominal payments mortgage contracts, a decline in nominal interest rates decreases mortgage payments and alleviates debt payments to income constraints that are more likely to bind for younger homeowners. In addition, a lower growth rate of nominal income slows the decline in the debt to income ratio over a borrower's life. To quantify the welfare costs of inflation in this environment, we calibrate the model to match U.S. homeownership rates, loan-to-value ratios, and debt-to-income ratios over the life-cycle in 2019 and conduct counterfactual experiments to evaluate how variations in steady state inflation impact consumption and housing over the life-cycle and welfare. We find that even modest steady state inflation can have significant welfare costs.