The Impact of Housing Market Conditions on Residential Property Upkeep

This paper assesses the impact of housing market conditions on the theoretically motivated and empirically observed negative relationship between loan-to-value (LTV) ratios and home maintenance expenditures. If the relationship is causal, then a down housing market will result in significantly decreased upkeep in the housing stock. The large rise and fall in home prices during the 20012009 period allows a unique opportunity to analyze the response of homeowners to changing housing market conditions. Data from the American Housing Survey are analyzed to confirm previous work that a negative relationship exists between LTV ratios and routine maintenance expenditures, however, this relationship does not move in the expected direction when examined along with temporal variations in market conditions. Panel analysis reveals a more complex story. Households most likely to be at risk for default decrease maintenance expenditures when default risk increases, but other households actually increased maintenance expenditures when the housing market conditions became less favorable.