Regional Redistribution through the US Mortgage Market

Hurst, Erik; Keys, Benjamin J.; Seru, Amit; Vavra, Joseph

doi:10.1257/aer.20151052

Cited by 170 publications

(126 citation statements)

References 33 publications

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“…However, consistent with results in Hurst et al (2016), the Appendix shows there is little variation in mortgage rates across MSAs and that rates fell as much in low equity locations as in high equity locations after QE1. This suggests that lower refinancing rates in low equity locations are not driven by higher borrowing costs.…”

Section: Regional Variation In Mortgage Activity Around Qe1supporting

confidence: 80%

Regional Heterogeneity and Monetary Policy

2015

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We argue that the time-varying regional distribution of housing equity influences the aggregate consequences of monetary policy through its effects on mortgage refinancing. Using detailed loan-level data, we show that regional differences in housing equity affect refinancing and spending responses to interest rate cuts but that these effects vary over time with changes in the regional distribution of house price growth. We then build a heterogeneous household model of refinancing with both mortgage borrowers and lenders and use it to explore the aggregate implications for monetary policy arising from our regional evidence. We find that the 2008 equity distribution made spending in depressed regions less responsive to interest rate cuts, thus dampening aggregate stimulus and increasing regional consumption inequality, whereas the opposite occurred in some earlier recessions. Taken together, our results strongly suggest that monetary policy makers should track the regional distribution of equity over time.

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Section: Regional Variation In Mortgage Activity Around Qe1supporting

confidence: 80%

Regional Heterogeneity and Monetary Policy

2015

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“…Although there were no significant changes to the program during the Great Recession, research has documented a strong link between labor market conditions and SSDI application rates (Autor and Duggan 2003;Sloane 2015), and strong effects of SSDI on 1 A large theoretical literature examines the role of tightening borrowing constraints on households and firms and how that translates into declining aggregate employment: for example, see Eggertsson and Krugman (2012) and Guerrieri and Lorenzoni (2011). 2 Greenstone, Mas, and Nguyen (2015) also examine the relationship between local credit supply shocks to local banks and local employment outcomes. They show that while credit supply shocks do reduce credit to small firms, the employment losses of small firms have little effect on local employment rates.…”

Section: Reviewing Cyclical and Structural Explanations Of Employmentmentioning

confidence: 99%

The Masking of the Decline in Manufacturing Employment by the Housing Bubble

Charles

Hurst

Notowidigdo

2016

Journal of Economic Perspectives

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107

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The employment-to-population ratio among prime-aged adults aged 25–54 has fallen substantially since 2000. The explanations proposed for the decline in the employment-to-population ratio have been of two broad types. One set of explanations emphasizes cyclical factors associated with the recession; the second set of explanations focuses on the role of longer-run structural factors. In this paper, we argue that while the decline in manufacturing and the consequent reduction in demand for less-educated workers put downward pressure on their employment rates in the pre-recession 2000–2006 period, the increased demand for less-educated workers because of the housing boom was simultaneously pushing their employment rates upwards. For a few years, the housing boom served to “mask” the labor market effects of manufacturing decline for less-educated workers. When the housing market collapsed in 2007, there was a large, immediate decline in employment among these workers, who faced not only the sudden disappearance of jobs related to the housing boom, but also the fact that manufacturing's steady decline during the early 2000s left them with many fewer opportunities in that sector than had existed at the start of the decade.

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“…43 Clearly, differences across MSAs in rate resets are muted relative to differences in ARM shares in (a). These differences in ARM resets with equity are also less than half the differences in FRM refinancing propensities.…”

Section: Arm Sharesmentioning

confidence: 99%

“…42 Calza, Monacelli, and Stracca (2013) also show that ARMs are more prevalent in Spain and Italy, which experienced large recessions, than in Germany and France. 43 We also require that the recorded required monthly payment not increase over the same period (which may indicate that the loan's IO period expired). 44 The regression line in panel (b) has a slope of -0.059 (s.e.…”

Section: Arm Sharesmentioning

confidence: 99%

Regional Heterogeneity and Monetary Policy

Beraja,

Fuster,

Hurst

et al. 2015

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe argue that the time-varying regional distribution of housing equity influences the aggregate consequences of monetary policy through its effects on mortgage refinancing. Using detailed loan-level data, we show that regional differences in housing equity affect refinancing and spending responses to interest rate cuts but that these effects vary over time with changes in the regional distribution of house price growth and unemployment. We then build a heterogeneous household model of refinancing and use it to explore the aggregate implications for monetary policy arising from our regional evidence. We find that the 2008 equity distribution made spending in depressed regions less responsive to interest rate cuts, thus dampening aggregate stimulus and increasing regional consumption inequality, whereas the opposite occurred in some earlier recessions. Taken together, our results strongly suggest that monetary policymakers should track the regional distribution of equity over time.

show abstract

Regional Redistribution through the US Mortgage Market

Cited by 170 publications

References 33 publications

Regional Heterogeneity and Monetary Policy

Regional Heterogeneity and Monetary Policy

The Masking of the Decline in Manufacturing Employment by the Housing Bubble

Regional Heterogeneity and Monetary Policy

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