Credit Supply and Housing Speculation

Mian, Atif; Sufi, Amir

doi:10.3386/w24823

Cited by 58 publications

(18 citation statements)

References 82 publications

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“…The role of subprime lending as one of the origins of the GFC was also confirmed by Mishkin (2011). Mian and Sufi (2019) also confirm that the credit supply conditions play a crucial role in speculative booms and busts in asset prices, which include house prices. Arslan et al (2020) present the importance of the credit supply channel during the booms, because of the higher leverage opportunities of the banking sector.…”

Section: Literature Reviewmentioning

confidence: 58%

The Use of Borrower-based Measures within Macroprudential Policy: Evidence from the European Economic Area

Fiala¹,

Teplý²

2021

EFAJ

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The article deals with borrower-based instruments within macroprudential policy as measures aimed at reducing systemic risk regarding household debt. Our contribution is three-fold; Firstly, we show that more than 50% of countries in the European Economic Area have incorporated the borrower-based measures into their national legal framework. Secondly, we provide evidence that in countries exceeding the average level of household debt growth, more active caps are used. Thirdly, our results confirm the use of more than one active cap in countries where the house price increase was higher than average house price growth. We also highlight the reaction of the Czech National Bank and other authorities to the COVID-19 crisis, which has resulted in the relaxing of standards.

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Section: Literature Reviewmentioning

confidence: 58%

The Use of Borrower-based Measures within Macroprudential Policy: Evidence from the European Economic Area

Fiala¹,

Teplý²

2021

EFAJ

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“…All these factors are likely important and intertwined. Mian and Sufi (2018) show that areas with higher private-label securitization experienced larger increases in house prices and construction. Barlevy and Fisher (2012) show that areas with higher use of alternative mortgages during the boom years also experienced stronger house price appreciation.…”

Section: Datamentioning

confidence: 92%

“…One of the main contributions of this paper is isolating the effect of second-home buying (as instrumented via the vacation share of housing) on changes in construction employment and house prices during the 2000s. I do so by showing that the vacation share of housing is uncorrelated with major determinants of the housing boom identified in the literature, including: the interaction of changes in housing demand with supply constraints (Saiz 2010;Aladangady 2017); the use of alternative mortgages such as interest-only or balloon mortgages (Barlevy and Fisher 2012;Foote et al 2008); the expansion in subprime credit (Mian and Sufi 2009;Demyanyk and Hemert 2011;Gerardi et al 2008); and the boom-bust in private-label securitization (Keys et al 2010;Nadauld and Sherlund 2009;Mian and Sufi 2018;Garcia 2018).…”

Section: Introductionmentioning

confidence: 94%

Second-Home Buying and the Housing Boom and Bust

García

2019

FEDS

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The effects of the surge in second-home buying (homeowners acquiring nonprimary residences) on the housing boom and bust remain an open question partly because reliable geographic data is currently unavailable. This paper constructs local data on second-home buying by merging credit bureau data with mortgage servicing records. The identification strategy exploits the fact that the vacation share of housing in 2000 predicts second-home origination shares during the boom years, while also uncorrelated with other boom-bust drivers including proxies for local housing expectations, the use of alternative and privately securitized mortgages, and supply constraints. Areas with plausibly exogenous increases in second-home buying experienced a sharper boom and bust. Overall, second-home buying could explain about 30 percent and 10 percent of the run-up in construction employment and house prices, respectively, from 2000 to 2006.JEL codes: R12, R21, R31

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“…It takes on average about four years for them to do so (47 months). 13 It is worth discussing some of the statistics related to borrowers with multiple homes, especially since recent work has suggested the important role of such consumers in perpetuating the crisis (see, Chinco and Mayer 2015, Mian and Sufi 2018. In our sample, such borrowers have an average of 2.3 homes.…”

Section: Iiia Individual Level Statisticsmentioning

confidence: 96%

Debt Relief and Slow Recovery: A Decade after Lehman

Piskorski

Seru

2018

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We follow a representative panel of millions of consumers in the U.S. from 2007 to 2017 and document several facts on the long-term effects of the Great Recession. There were about six million foreclosures in the ten-year period after Lehman's collapse. Owners of multiple homes accounted for 25% of these foreclosures, while comprising only 13% of the market. Foreclosures displaced homeowners, with most of them moving at least once. Only a quarter of foreclosed households regained homeownership, taking an average four years to do so. Despite massive stimulus and debt relief policies, recovery was slow and varied dramatically across regions. House prices, consumption and unemployment remain below pre-crisis levels in about half of the zip codes in the U.S. Regions that recovered to pre-crisis levels took on average four to five years from the depths of the Great Recession. Regional variation in the extent and speed of recovery is strongly related to frictions affecting the pass-through of lower interest rates and debt relief to households including mortgage contract rigidity, refinancing constraints, and the organizational capacity of intermediaries to conduct loan renegotiations. A simple counterfactual based on our estimates suggest that, regardless of the narratives of the causes of housing boom and bust, alleviating these frictions could have reduced the relative foreclosure rate by more than half and resulted in up to twice as fast recovery of house prices, consumption, and employment. Our findings have implications for mortgage market design, monetary policy pass-through, and macro-prudential and housing policy interventions.

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Credit Supply and Housing Speculation

Cited by 58 publications

References 82 publications

The Use of Borrower-based Measures within Macroprudential Policy: Evidence from the European Economic Area

The Use of Borrower-based Measures within Macroprudential Policy: Evidence from the European Economic Area

Second-Home Buying and the Housing Boom and Bust

Debt Relief and Slow Recovery: A Decade after Lehman

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