This paper appeared in the Sloan Management Review, Fall 1975.

At head of title: Mortgage study reports, report [no.] 2. This project is funded by the Dept. of Housing and Urban Development and the Federal Home Loan Bank under HUD contract no. H-2211R.

"This paper draws substantially on a much longer study that John Williamson and I published, entitled: Financial intermediation beyond the debt crisis, Washington : Institute for Internal Economics, 1985"--P.2.

"Presented at the 1997 SMS Conference in Barcelona, Spain."

Much of the existing literature on homeownership assumes that financial markets work well enough to allow households to translate permanent income into effective demand. However, transaction costs, imperfections, and uncertainties all constrain the markets' operation so that people are often...