The Effects of Assumption Financing Across Housing Price Categories

This study employs a standard housing valuation model to analyze the capitalization of below-market financing across housing price categories. The study also investigates the effect of secondary financing on housing prices and the effect of the expected holding period on discount capitalization. Using a randomly selected sample of 1981-82 housing transactions the study finds: the discount associated with below-market financing is inversely related to the absolute level of housing prices; secondary financing bears no systematic relationship to housing values; and discount capitalization is inversely related to the expected holding period. Copyright American Real Estate and Urban Economics Association.