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.

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 DO INFLATION, INTEREST RATE AND COST OF RENTING AFFECT THE PRICE OF TERRACE HOUSES IN PENANG?

2020 ◽  
Vol 18 (13) ◽  
Author(s):  
Zaemah Zainuddin ◽  
Rosylin Mohd Yusof
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Multivariate Regression ◽  
House Prices ◽  
House Price ◽  
Multivariate Regression Analysis ◽  
Middle Income ◽  
Rental Rate ◽  
Mortgage Rates ◽  
The Cost

In Malaysia, the housing ownership is reported to decrease from 85% in 1999 to 72.5% in 2010. This is due to the outstripped increase of house price over the income level and the unstable economic situation which creates unaffordability to own a house for many people. Therefore, the main objective of this study is to examine whether the price of terrace houses in Penang is being affected with fundamental factors such as inflation, interest rates and the cost of renting. This study uses multivariate regression analysis with quarterly data of terrace house prices (HPI terrace house in Penang), inflation (CPI) and interest rate (mortgage rates) from 2009: Q1 to 2016: Q4. Evidently, the cost of renting terrace houses in Penang does not have any impact on the price of terrace houses and the stable movement of cost of renting indicates that the growth of rental rate is at acceptable price for middle income earners.

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 Mortgage Choice in the Housing Boom: Impacts of House Price Appreciation and Borrower Type

2014 ◽  
pp. 01-68 ◽  
Author(s):  
Frederick T. Furlong ◽  
◽  
Yelena Takhtamanova ◽  
David Lang ◽  
◽  
...  
Keyword(s):  
House Price ◽  
Mortgage Choice ◽  
Housing Boom ◽  
Price Appreciation

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.

Superstar Cities

2013 ◽  
Vol 5 (4) ◽  
pp. 167-199 ◽  
Author(s):  
Joseph Gyourko ◽  
Christopher Mayer ◽  
Todd Sinai
Keyword(s):  
Metropolitan Area ◽  
Metropolitan Areas ◽  
House Prices ◽  
Aggregate Demand ◽  
House Price ◽  
Lower Income ◽  
Local Factors ◽  
The Past ◽  
Long Run ◽  
Price Appreciation

We document large long-run differences in average house price appreciation across metropolitan areas over the past 50 years, and show they can be explained by an inelastic supply of land in some unique locations combined with an increasing number of highincome households nationally. The resulting high house prices and price-to-rent ratios in those “superstar” areas crowd out lower income households. The same forces generate a similar pattern among municipalities within a metropolitan area. These facts suggest that disparate local house price and income trends can be driven by aggregate demand, not just changes in local factors such as productivity or amenities. (JEL R11, R23, R31, R52)

Determinants of Treasury-LIBOR Swap Spreads

2005 ◽  
Vol 08 (04) ◽  
pp. 687-705 ◽  
Author(s):  
D. K. Malhotra ◽  
Vivek Bhargava ◽  
Mukesh Chaudhry
Keyword(s):  
Interest Rate ◽  
Interest Rates ◽  
Default Risk ◽  
Yield Curve ◽  
Short Term ◽  
Long Run ◽  
Interest Rate Volatility ◽  
Short Run ◽  
Using Data ◽  
Swap Spreads

Using data from the Treasury versus London Interbank Offer Swap Rates (LIBOR) for October 1987 to June 1998, this paper examines the determinants of swap spreads in the Treasury-LIBOR interest rate swap market. This study hypothesizes Treasury-LIBOR swap spreads as a function of the Treasury rate of comparable maturity, the slope of the yield curve, the volatility of short-term interest rates, a proxy for default risk, and liquidity in the swap market. The study finds that, in the long-run, swap spreads are negatively related to the yield curve slope and liquidity in the swap market. We also find that swap spreads are positively related to the short-term interest rate volatility. In the short-run, swap market's response to higher default risk seems to be higher spread between the bid and offer rates.

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