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This paper examines the responsiveness of renters′ decisions to save for home purchase to house prices. I use membership in a tax-deferred savings program for prospective first-time home buyers in Canada to identify renter households who are saving for a down payment. I find that high house prices substantially reduce the probability of households saving for a down payment: a 4000 increase in house prices decreases the probability of saving for a down payment by one percentage point. In addition, households saving for home purchase have 300 less in accumulated assets for every 1000 higher increment to house prices.
Gary V. Engelhardt (Thu,) studied this question.