Abstract
In this paper, we use data from the Household Expenditures Survey conducted by the Central Bureau of Statistics to analyze changes in how home purchases were financed in a period marked by a sharp increase in home prices. We found that households that purchased a home after the price increase financed the acquisition by significantly increasing the size of the mortgage and somewhat increasing their down payment. Despite the sharp increase in the mortgage, households’ payment to income ratio did not increase. This development was made possible due to a notable extension of mortgage duration (which lengthened by about 6 years over the past 8 years); a decline in the average interest rate on mortgages; and some increase in households’ real income. As a result, there was no negative impact on the ability of households that purchased a home after the price increase to maintain a level of private consumption in those years, similar to that of comparable households that purchased homes in earlier years. It is reasonable to assume that a major portion of the increase in households’ down payment was possible because of the sharp increase in the value of financial assets held by the public in the past decade.