Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls

DeFusco, Anthony

doi:10.1111/jofi.12602

Cited by 82 publications

(11 citation statements)

References 105 publications

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“…The two papers closest to our work are DeFusco (2018) and Benmelech, Guren, and Melzer (2023). DeFusco (2018) finds that relaxing collateral constraints on homeowners leads to an increase in borrowing and also applications for home improvement permits.…”

Section: Related Literaturementioning

confidence: 71%

House price rises and borrowing to invest

Crossley,

Levell,

Low

2024

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Household borrowing and spending rise with house prices, particularly for leveraged households, but household spending is not consumption. We propose a borrow-to-invest motive by which house price gains affect household spending on residential investment: rational, leveraged households have an incentive to make additional residential investments when house prices rise. Credit constraints then matter through reducing access to leveraged returns and so reducing lifetime resources, rather than through consumption smoothing. We test this motive by comparing responses in different categories of spending across more and less leveraged households. We find strong evidence of the borrow-to-invest motive in UK data.

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Section: Related Literaturementioning

confidence: 71%

House price rises and borrowing to invest

Crossley,

Levell,

Low

2024

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“…Secondly, since the real estate can be used as mortgage, high housing price increases the market value of a house so that the family could obtain more low-interest loans through mortgaging their house to financial sector. The financial constraint is thus alleviated and the family can smooth their consumption [16,[26][27][28].…”

Section: High House Prices and Consumptionmentioning

confidence: 99%

Do high house prices promote the development of China’s real economy? Empirical evidence based on the decomposition of real estate price

Fan,

He,

Hao

et al. 2024

PLoS ONE

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Moderate rising of house prices are beneficial to the economic development. However, over high house prices worsen the economic distortions and thus hinder the development of the real economy. We use the stochastic frontier models to calculate the fundamental value in the housing in Chinese large and medium cities, and then obtain indexes which could measure the house prices’ deviations from the fundamental value. With the macroeconomic data in the city-level, this paper empirically investigates the effects of the house prices’ deviations on macro-economic variables like consumption, investment and output. The study reveals that the housing bubble exists in most Chinese cities, and first-tier cities fare the worst. House prices over the fundamental value, which could increase the scale of real estate investment, bring adverse impacts on GDP, as it causes declining civilian consumption and discourages real economy’s investment and production. The encouragement and the discouragement on macroeconomy caused by house prices’ deviation from its basic value take turns to play a key role in the process of China’ eco-nomic growth. In the early stage of China’s economic growth, the encouragement effect predominates. As urbanization and industrialization gradually upgrade to a higher level, the discouragement effect takes charge.

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“…Oikarinen (2009) and DeFusco (2018) found that rising housing prices increase the expected wealth of households, leading to more consumption and ultimately expanding credit demand. Due to the rise in house prices, it is common for a Chinese family to buy a house with a loan [50,51]. Higher house prices naturally lead to an increase in housing loans.…”

Section: Theoretical Analysismentioning

confidence: 99%

The Dynamic Correlation among Financial Leverage, House Price, and Consumer Expenditure in China

et al. 2021

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With the help of the time-varying parameter vector autoregression with stochastic volatility (TVP-SV-VAR) model and the Bayesian dynamic conditional correlational autoregressive conditional heteroscedasticity (Bayesian DCC-GARCH) model, this study analyzes the interaction mechanism and dynamic correlation among financial leverage, house price, and consumer expenditure (the survey data are collected from China’s National Bureau of Statistics from January 2000 to December 2019; the data on financial leverage and consumer expenditure are from the Wind economic database, and the price of commercial housing was calculated based on the sales volume and area of commercial housing on the official website of China’s National Bureau of Statistics). Empirical results show that an increase in financial leverage significantly increases house prices and reduces consumer expenditure, that a rise in house prices inhibits financial leverage and weakens consumer expenditure, and that an increase in consumer expenditure raises financial leverage and stimulates a rise in house prices. In addition, house price and consumer expenditure are most relevant, followed by financial leverage and consumer expenditure, and then by financial leverage and house price. Therefore, systematic analysis of dynamic correlation among the three variables has important practical significance for formulating appropriate financial policies to stabilize house prices and promote the growth of consumer expenditures. Specially, financial leverage is an important factor to hold back soaring house prices and shrinking consumer expenditure. Therefore, monetary and macroprudential policies should be used to deal with financial leverage variables in order to achieve a balanced and sustainable development of the macroeconomy in China.

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Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls

Cited by 82 publications

References 105 publications

House price rises and borrowing to invest

House price rises and borrowing to invest

Do high house prices promote the development of China’s real economy? Empirical evidence based on the decomposition of real estate price

The Dynamic Correlation among Financial Leverage, House Price, and Consumer Expenditure in China

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