scholarly journals Credit Supply and Housing Speculation

2021 ◽  
Author(s):  
Atif Mian ◽  
Amir Sufi
Keyword(s):  
House Price ◽  
Private Label ◽  
Credit Supply ◽  
Mortgage Credit ◽  
Mortgage Securitization ◽  
Large Expansion ◽  
Housing Boom ◽  
Belief Heterogeneity ◽  
Price Growth ◽  
Boom And Bust

Abstract Credit supply expansion boosts housing speculation and amplifies the housing cycle. The surge in private-label mortgage securitization in 2003 fueled a large expansion in mortgage credit supply by lenders financed with noncore deposits. Areas more exposed to these lenders experienced a large relative rise in transaction volume driven by a small group of speculators, and these areas simultaneously witnessed an amplified housing boom and bust. Consistent with the importance of belief heterogeneity, house price growth expectations of marginal buyers rose during the boom, while housing market pessimism among the general population increased.

scholarly journals Subprime May Not Have Caused the 2000s Housing Crisis: Evidence from Cleveland, Ohio

2020 ◽  
pp. 1-8
Author(s):  
Lara Loewenstein
Keyword(s):  
House Price ◽  
Causal Role ◽  
Housing Crisis ◽  
Ground Zero ◽  
Mortgage Debt ◽  
Foreclosure Crisis ◽  
National Media ◽  
Housing Boom ◽  
Price Growth ◽  
Stark Contrast

During the 2000s housing bust, Cleveland’s Slavic Village was dubbed “ground zero of the foreclosure crisis” by the national media. Despite this, during the preceding housing boom Cleveland had stable house price growth and relatively low mortgage debt growth, a stark contrast to circumstances in areas such as California that had exceptionally high house price and mortgage debt growth. What explains the relatively minor housing boom and perceived sharp downturn in Cleveland? In this Commentary I show that while subprime debt was a prominent source of debt in Cleveland and especially in its Slavic Village neighborhood during the 2000s, it is difficult to peg subprime debt as playing a causal role in the subsequent foreclosure crisis.

scholarly journals Interest Rates and Equity Extraction During the Housing Boom

2016 ◽  
Vol 106 (7) ◽  
pp. 1742-1774 ◽  
Author(s):  
Neil Bhutta ◽  
Benjamin J. Keys
Keyword(s):  
Interest Rates ◽  
Default Risk ◽  
House Price ◽  
Home Equity ◽  
Credit Score ◽  
Housing Boom ◽  
Price Appreciation ◽  
Price Growth ◽  
Mortgage Rates ◽  
New Evidence

Credit record panel data from 1999–2010 indicates that the likelihood of home equity extraction (borrowing, on average, about $40,000 against one's home) peaked in 2003 when mortgage rates reached historic lows. We estimate a 27 percent rise in extraction in response to a 100 basis point rate decline, and that house price growth amplifies this relationship. Differential responses to interest rates and home price appreciation by borrower age and credit score provide new evidence of financial frictions. Finally, equity extractions are associated with higher default risk, consistent with the use of borrowed funds for consumption or illiquid investment. (JEL D14, E43, E52, G12, R31)

scholarly journals Cross-Sectional Patterns of Mortgage Debt during the Housing Boom: Evidence and Implications

2020 ◽  
Author(s):  
Christopher L Foote ◽  
Lara Loewenstein ◽  
Paul S Willen
Keyword(s):  
Interest Rates ◽  
Low Income ◽  
House Price ◽  
Data Sets ◽  
Subprime Lending ◽  
Cross Sectional ◽  
Mortgage Debt ◽  
Exogenous Shock ◽  
Housing Boom ◽  
Price Growth

Abstract In this paper, we use two comprehensive micro-data sets to study how the distribution of mortgage debt evolved during the 2000s housing boom. We show that the allocation of mortgage debt across the income distribution remained stable, as did the allocation of real estate assets. Any theory of the boom must replicate these facts, and a general equilibrium model shows that doing so requires two elements: (1) an exogenous shock that increases expected house price growth or, alternatively, reduces interest rates and (2) financial markets that endogenously relax borrowing constraints in response to the shock. Empirically, the endogenous relaxation of constraints was largely accomplished with subprime lending, which allowed the mortgage debt of low-income households to increase at the same rate as that of high-income households.

Role of the Community Reinvestment Act in Mortgage Supply and the U.S. Housing Boom

2020 ◽  
Vol 33 (11) ◽  
pp. 5288-5332 ◽  
Author(s):  
Vahid Saadi
Keyword(s):  
House Price ◽  
Mortgage Lending ◽  
Community Reinvestment Act ◽  
Census Tracts ◽  
Community Reinvestment ◽  
Housing Boom ◽  
Price Growth ◽  
Boom Period ◽  
The U.S

Abstract This paper studies the role of the Community Reinvestment Act (CRA) in the U.S. housing boom-bust cycle. I find that enhanced CRA enforcement in 1998 increased the growth rate of mortgage lending by CRA-regulated banks to CRA-eligible census tracts. I show that during the boom period house price growth was higher in the eligible census tracts because of the shift in mortgage supply of regulated banks. Consequently, these census tracts experienced a worse housing bust. I find that CRA-induced mortgages were awarded to borrowers with lower FICO scores and were more frequently delinquent.

scholarly journals The Anatomy of the Transmission of Macroprudential Policies

2020 ◽  
Vol 20 (58) ◽  
Author(s):  
Viral Acharya ◽  
Katharina Bergant ◽  
Matteo Crosignani ◽  
Tim Eisert ◽  
Fergal McCann
Keyword(s):  
Portfolio Choice ◽  
House Prices ◽  
House Price ◽  
Residential Mortgage ◽  
Macroprudential Policies ◽  
Regulatory Constraints ◽  
Corporate Credit ◽  
Mortgage Credit ◽  
Level Data ◽  
Price Growth

We analyze how regulatory constraints on household leverage—in the form of loan-to-income and loan-to-value limits—a?ect residential mortgage credit and house prices as well as other asset classes not directly targeted by the limits. Supervisory loan level data suggest that mortgage credit is reallocated from low-to high-income borrowers and from urban to rural counties. This reallocation weakens the feedback loop between credit and house prices and slows down house price growth in “hot” housing markets. Consistent with constrained lenders adjusting their portfolio choice, more-a?ected banks drive this reallocation and substitute their risk-taking into holdings of securities and corporate credit.

International Real Estate Review

2009 ◽  
Vol 12 (3) ◽  
pp. 193-220
Author(s):  
Karol Jan Borowiecki ◽  
Keyword(s):  
Real Estate ◽  
Positive Impact ◽  
House Prices ◽  
House Price ◽  
Housing Price ◽  
Quality Improvements ◽  
Vector Autoregressive ◽  
Price Growth ◽  
Price Determinants ◽  
A Minor

This paper studies the Swiss housing price determinants. The Swiss housing economy is reproduced by employing a macro- series from the last seventeen years and constructing a vector-autoregressive model. Conditional on a comparatively broad set of fundamental determinants considered, i.e. wealth, banking, demographic and real estate specific variables, the following findings are made: 1) real house price growth and construction activity dynamics are most sensitive to changes in population and construction prices, whereas real GDP, in contrary to common empirical findings in other countries, turns out to have only a minor impact in the short-term, 2) exogenous house price shocks have no long-term impacts on housing supply and vice versa, and 3) despite the recent substantial price increases, worries of overvaluation are unfounded. Furthermore, based on a self-constructed quality index, evidence is provided for a positive impact of quality improvements in supplied dwellings on house prices.

scholarly journals Credit Supply and the Housing Boom

2015 ◽  
Author(s):  
Alejandro Justiniano ◽  
Giorgio E. Primiceri ◽  
Andrea Tambalotti
Keyword(s):  
Credit Supply ◽  
Housing Boom
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