We explore the determinants of the distribution of owner occupancy rates across age groups using a collection of microeconomic data on 14 OECD countries. In most, the survey is repeated over time. This allows us to construct an international dataset, merging data on 39 national household surveys with aggregate data on down payment ratios. We have strong evidence that the availability of mortgage finance as measured by down payment ratios affects the distribution of owner occupancy rates across age groups, especially at the young end. The results are consistent with previous theoretical models and have important implications for the debate on the relation between saving and growth. The owner occupancy rate of young households varies significantly by country. In Australia, Canada, the United States, and the United Kingdom, for instance, homes are purchased early in life and the owner occupancy rate is already high at young ages. In other countries, such as Austria, Italy, Japan, and Spain, homes are purchased later on and the average age at 5rst purchase is in the late 30s or 40s.

From the individual’s point of view, tenure choice is determined by permanent income, the cost of owning relative to renting and demographic variables. Due to asymmetric information and other credit market frictions, lenders often require equity contributions from borrowers when granting a home mortgage loan. Thus, besides permanent income, also accumulated savings in the form of liquid wealth to be used as a down payment is an important factor in determining the timing of home purchase. In the real estate literature, there is in fact substantial evidence that the down payment affects mortgage availability and the timing of the home purchase of young individuals, at least in the US, see for instance Duca and Rosenthal (1994)and Haurient al. (1997). Only recently the literature has examined the macroeconomic impact of down payment constraints. Italo-MagnEe and Rady (1998, 1999)show that, in the absence of a bequest motive, a higher down payment ratio reduces the equilibrium distribution of the owner occupancy rate of the young generation. Their model implies that in countries with tighter credit markets (e.g., with a higher down payment) one should observe lower levels of owner occupancy rates among the young than in countries where credit is more easily available. This hypothesis is the main focus of the paper.