Children of homeowners who start college following an increase in home prices during their teenage years are more likely to earn more after college and to have greater educational opportunities than the children of renters or children of homeowners who start college following a period of flat or falling housing prices, according to a new study from the Federal Reserve Bank of Boston.
The study, which explored the relationship of home-price fluctuation and the success of teenage children, found that, with other factors held equal, children of homeowners are better off when the value of their parents' home increases during the years leading up to college, in part because those parents are able to invest some of the value of their homes into their child's education. Parents who rent do not carry any equity in their home, leaving them without that extra source of income to invest in their child's education. Similarly, when home prices decrease or stay flat, home-owning parents are not able to invest as heavily.
Specifically, the study found a 1 percent increase in home prices when children are 17-years-old results in a 0.8 percent higher annual income for the children of homeowners (later in life) while at the same time resulting in a 1.2 percent lower income for the children of renters.
To view the study, click here.