Credit Supply and House Prices: Evidence from Mortgage Market Segmentation

Adelino, Manuel; Schoar, Antoinette; Severino, Felipe

doi:10.2139/ssrn.1787252

Cited by 85 publications

(120 citation statements)

References 49 publications

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“…Easier financing may have stimulated housing turnover but the relaxation of corresponding statewide restrictions on branching occurred at different times in different states, so we cannot measure the impact of IBBEA94 accurately in our sample of regional turnover. Adelino, Schoar and Severino () explore the relationship between increases in the conforming loan limit, which occurred several times during our sample period, and the value of houses that moved into the range of eligibility for securitization by Government Sponsored Enterprises. They find that house prices increased significantly with GSE loan purchase eligibility.…”

Section: Macro‐level Evidencesupporting

confidence: 84%

The Impact of the Taxpayer Relief Act of 1997 on Housing Turnover in the U.S. Single‐Family Residential Market

Heuson

Painter

2014

Real Estate Economics

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The Taxpayer Relief Act of 1997 (TRA97) replaced a one‐time, post‐age‐55 capital gain exclusion with a larger gain exclusion amount that could be protected every two years without requiring that the taxpayer trades up in housing. This action had the potential to impact housing transactions for every existing homeowner, regardless of age, as well as future purchasers of housing. We analyze household‐level data to determine if the repeated ability to exclude periodic recognized capital gains on housing from taxation shortened housing tenure significantly after TRA97 became effective. We next consider whether the decline was heterogeneous across age groups, across trading up and trading down and across geography. Given that the impact of TRA97 appears at first glance to be most profound for taxpayers close to 55 years of age, a somewhat surprising result of our research is that significant decreases in tenure are pervasive, appearing in all age ranges and in samples of homeowners who trade up and who trade down. Finally, we provide additional evidence at the aggregate level that TRA97 led to measurable changes in the price elasticity of housing turnover in the four geographic regions defined by the U.S. Census Bureau (Northeast, Midwest, South and West) and in states that are home to large metropolitan housing markets.

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Section: Macro‐level Evidencesupporting

confidence: 84%

The Impact of the Taxpayer Relief Act of 1997 on Housing Turnover in the U.S. Single‐Family Residential Market

Heuson

Painter

2014

Real Estate Economics

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“…As a result the share of borrowers that are considered as solvent and the volume of credit in the economy both expand. The huge development of cheap credit in the pre-crisis period, with the extreme example of the US subprime loans, suggests a positive correlation between credit and house price appreciation (Mian and Sufi, 2009;Adelino et al, 2012) 18,19 . However, the impact of this variable cannot be restricted only at the boom of the market, since after the bust liquidity constraints emerge.…”

Section: A Theoretical Model Of House Pricesmentioning

confidence: 99%

House Prices and Current Account Imbalances in OECD Countries

Arestis

Gonzalez-Martinez

2015

Int. J Fin Econ

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This contribution attempts to provide theoretical propositions and empirical evidence on the 'obscure' relationship between current account imbalances and house prices. We propose a theoretical framework, which studies the interaction between house prices and current account imbalances and also pays special attention to the role played by fiscal and monetary policies. In a second stage of this contribution, our theoretical framework is estimated empirically by using data from 17 OECD economies, which spans the period 1970-2013. In doing so, the least squares technique with breakpoints is employed.1 Also, Renaud (1995) considers that the synchronized housing cycle, which took place during the period 1985-1994 in some OECD countries, was due to financial liberalization. Otrok and Terrones (2005) consider, as explanatory variables of these common movements, interest rates and economic activity. 2 The sign below a variable indicates the partial derivative of the demand for housing with respect to that variable. 3 Punzi (2013) points to a negative correlation between current account and housing variables. Utilizing a two-country DSGE model, Punzi (op. cit.) argues that the 'wealth' effect, which emanates from rising house prices, boosts domestic consumption, in view of getting into debt becoming easier, thereby contributing to a current account deficit. Aizenman and Jinjarak (2009) also identify a negative correlation between real estate prices and current account. HOUSE PRICES AND CURRENT ACCOUNT IMBALANCES 59

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“…Thus, in order to properly match U.S. data we replace our perfect foresight assumption with an adaptive learning rule, in the spirit of Evans and Honkapohja (2001) and Hommes (2013), that has been able to generate large swings in asset prices and excess volatility in other contexts. 3 We calibrate the learning model to U.S. data, solve for the learning path and show that the model generates a house price boom of the same magnitude as exhibited in the data. Moreover, the model provides a good …t to sectoral labor ‡ows and the unemployment rate.…”

Section: Introductionmentioning

confidence: 93%

Financial frictions, the housing market, and unemployment

Branch

Petrosky-Nadeau

Rocheteau

2016

Journal of Economic Theory

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We develop a two-sector search-matching model of the labor market with imperfect mobility of workers, augmented to incorporate a housing market and a frictional goods market. Homeowners use home equity as collateral to …nance idiosyncratic consumption opportunities. A …nancial innovation that raises the acceptability of homes as collateral raises house prices and reduces unemployment. It also triggers a reallocation of workers, with the direction of the change depending on …rms'market power in the goods market. A calibrated version of the model under adaptive learning can account for house prices, sectoral labor ‡ows, and unemployment rate changes over 1996-2010. JEL Classi…cation: D82, D83, E40, E50

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Credit Supply and House Prices: Evidence from Mortgage Market Segmentation

Cited by 85 publications

References 49 publications

The Impact of the Taxpayer Relief Act of 1997 on Housing Turnover in the U.S. Single‐Family Residential Market

The Impact of the Taxpayer Relief Act of 1997 on Housing Turnover in the U.S. Single‐Family Residential Market

House Prices and Current Account Imbalances in OECD Countries

Financial frictions, the housing market, and unemployment

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