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 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 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)

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.

House Price Shocks, Credit Constraints and Household Indebtedness

2020 ◽  
Vol 72 (3) ◽  
pp. 780-803 ◽  
Author(s):  
By Kadir Atalay ◽  
Garry F Barrett ◽  
Rebecca Edwards ◽  
Chaoran Yu
Keyword(s):  
Life Cycle ◽  
Credit Card ◽  
House Prices ◽  
House Price ◽  
Wealth Effect ◽  
Housing Wealth ◽  
Mortgage Debt ◽  
Collateral Constraints ◽  
Theoretical Predictions ◽  
Price Growth

Abstract We analyse the effect of housing wealth on household indebtedness in a life-cycle framework. Exploiting longitudinal household data and temporal and geographic variation in house prices, our empirical results indicate that households respond to increases in housing wealth by significantly increasing their debt. The effect is strongest for households that are moderately leveraged, highlighting the importance of collateral constraints. Furthermore, we uncover a weaker wealth effect from house price growth for households that have faced negative shocks to income or employment. Importantly, our findings are consistent with the theoretical predictions of the life-cycle model: households increase their mortgage debt, but not their unsecured credit card debt. A novel finding is that we uncover a moderate positive wealth effect on investment loans.

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.

City as borderland: Gentrification and the policing of Black and Latinx geographies in Oakland

2019 ◽  
Vol 38 (1) ◽  
pp. 147-166 ◽  
Author(s):  
Margaret M Ramírez
Keyword(s):  
San Francisco ◽  
Low Income ◽  
San Francisco Bay ◽  
San Francisco Bay Area ◽  
Sound Studies ◽  
Housing Crisis ◽  
Geographic Thought ◽  
The Past ◽  
Bay Area ◽  
Foreclosure Crisis

From the foreclosure crisis of 2008, to the tech boom-provoked housing crisis currently engulfing the San Francisco Bay Area, low-income residents of Oakland, California have been displaced from their homes at an alarming rate over the past decade. In this piece I draw from Gloria Anzaldúa’s Borderlands and engage with Black geographic thought, urban and sound studies to build a borderlands analytic. I consider how the “tension, ambivalence and unrest” of the borderlands provides a lens to understand the volatility of cities gripped by rapid gentrification. Using a borderlands analytic to make sense of the borders that are produced and policed in gentrifying cities, I consider how Black and Latinx life has been criminalized spatially and sonically so as to be displaced by forces of racial capitalist extraction. To do this, I look to the implementation of gang injunction zones in Oakland in 2010, and then to two moments in 2015 when the city’s soundscapes were policed and criminalized. This piece centers the Black and Latinx geographies experiencing dispossession in Oakland, and considers how residents are imagining and fighting for their city’s future.

scholarly journals Club convergence of house prices: Evidence from China’s ten key cities

2015 ◽  
Vol 29 (24) ◽  
pp. 1550181 ◽  
Author(s):  
Hao Meng ◽  
Wen-Jie Xie ◽  
Wei-Xing Zhou
Keyword(s):  
Housing Market ◽  
House Prices ◽  
House Price ◽  
Economic Recession ◽  
Housing Markets ◽  
Extensive Study ◽  
Ripple Effect ◽  
Chinese Stock Market ◽  
Price Growth ◽  
Chinese Housing Market

The latest global financial tsunami and its follow-up global economic recession has uncovered the crucial impact of housing markets on financial and economic systems. The Chinese stock market experienced a marked fall during the global financial tsunami and China’s economy has also slowed down by about 2%–3% when measured in GDP. Nevertheless, the housing markets in diverse Chinese cities seemed to continue the almost nonstop mania for more than 10 years. However, the structure and dynamics of the Chinese housing market are less studied. Here, we perform an extensive study of the Chinese housing market by analyzing 10 representative key cities based on both linear and nonlinear econophysical and econometric methods. We identify a common collective driving force which accounts for 96.5% of the house price growth, indicating very high systemic risk in the Chinese housing market. The 10 key cities can be categorized into clubs and the house prices of the cities in the same club exhibit an evident convergence. These findings from different methods are basically consistent with each other. The identified city clubs are also consistent with the conventional classification of city tiers. The house prices of the first-tier cities grow the fastest and those of the third- and fourth-tier cities rise the slowest, which illustrates the possible presence of a ripple effect in the diffusion of house prices among different cities.

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