Apr 15

Children Get Richer From Home Prices Too

Children Get Richer From Home Prices Too

 

Children Get Richer From Home Prices Too. Image courtesy of stockimages / FreeDigitalPhotos.net

Children Get Richer From Home Prices Too. Image courtesy of stockimages / FreeDigitalPhotos.net

Home prices can influence a home owner’s child’s future income, according to a new study by the Federal Reserve Bank of Boston.

Researchers found that when households included a 17-year-old, they saw a 1 percent rise in home prices that year that led to about 0.9 percent higher annual income for that child later in life if the parents owned the home, according to the study published in the Journal of Urban Economics. On the other hand, if the parents were renters, a 1 percent rise in home prices resulted in 1.5 percent lower annual income for the child.

“If home prices are rising, parents who are home owners may have additional resources to finance a child’s higher education, either because they feel richer or they can borrow against the home’s equity,” Maria Jose Luengo-Prado, a senior economist at the Federal Reserve Bank of Boston, says about the report. “This may allow their children to attend college or attend a higher-ranked [more expensive] school. On the other hand, the effect of rising house prices for parents who are renters is the opposite. Rising housing prices often mean higher housing costs. Rents go up. They may also need to save more money for a down payment to buy a house in the future.”

Source: “Salary Advantage Goes to Children of Homeowners,” The Wall Street Journal (April 12, 2015)

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