Age, housing demand, and real house prices

Real house prices are directly determined by the willingness of households to pay for (and willingness of builders to supply) a constant-quality house. Changes in the quantity of housing demanded will affect real prices only to the extent that the long-run housing supply schedule is positively sloped. In this paper we use 1980 census data to measure the impact of the age structure, education and income on the willingness of households to pay for a constant-quality house. We compute total and partial derivatives for the effect of age on housing demand. The total derivatives-which carry along with age all of the average characteristics (i.e. income, marital status and education) associated with that age-look much like the Mankiw-Weil age-demand results. But the partial derivatives suggest that holding all else constant, the demand for housing tends to be flat or rising slightly with age. Since much is in fact held constant over the life-cycle, we believe that our partial derivatives more accurately depict the age-demand relationship and thus that the aging of the population should not be expected to lower real house prices.