winners and losers in housing markets this paper is a quantitatively oriented theoretical study into the interaction between housing prices aggregate production and household behaviour over a lifetime we develop a life cycle model of a production economy in which land and capital are used to build residential and commercial structures we find that in an economy where the share of land in the value of structures is large housing prices react more to an exogenous change in expected productivity or the world interest rate causing large redistribution effects between net buyers and net sellers of houses changing the financing constraint however has limited effects on housing prices

liquidity constraints and housing prices theory and evidence from the va mortgage program abstract this paper employs a simple intertemporal model to show that presence of liquidity constraints can depress the price of a durable good below its net present rental value regardless of the overall supply elasticity the existence of price effects implies that the relaxation of liquidity constraints is not pareto improving and may in fact be regressive historical evidence which exploits the fact that a clearly identifiable group war veterans enjoyed the most favored access to mortgage credit after world war ii supports the model the results suggest that more recent mortgage market innovations have served primarily to increase prices rather than home ownership rates and that such innovations have the potential to exacerbate socioeconomic disparities in ownership rates

macroeconomic and distributional effects of mortgage guarantee programs for the poor abstract government driven mortgage guarantee programs for example loans insured through the federal housing administration the department of veterans affairs and the rural housing service aim to help financially disadvantaged households buy and own their houses this study analyzes the macroeconomic and distributional effects of these government programs we propose a quantitative model where households endogenously choose their mortgage types either with or without government guarantees households that take out mortgages with government guarantees pay an up front insurance premium while those that choose mortgages without guarantees face borrowing limits our results show that a hypothetical decline in government subsidies for mortgage guarantee programs can improve aggregate household welfare mainly due to endogenous changes in mortgage interest rates and tax burdens rather than in housing prices the welfare implications are different across households depending on their financial status

did dubious mortgage origination practices distort house prices zip codes with high concentrations of originators who misreported mortgage information experienced a 75 larger relative increase in house prices from 2003 to 2006 and a 90 larger relative decrease from 2007 to 2012 compared with other zip codes several causality tests show that high fractions of dubious originators in a zip code lead to large price distortions originators with high misreporting gave credit to borrowers with high ex ante risk yet further understated the borrowers true risk overall excess credit facilitated through dubious origination practices explain much of the regional variation in house prices over a decade

credit constraints house prices and the impact of life cycle dynamics abstract how does the life cycle impact house price dynamics this paper investigates how equilibrium house prices respond to a tightening in credit constraints under two different but similarly calibrated models one an infinite horizon setting and the other a life cycle environment the main conclusion is that house price dynamics are magnified by the presence of life cycle features two primary explanations stand out the distinction between stocks and flows of mortgage debt in the cross section and the importance of gross housing tenure flows i e churn

the role and growth of new car leasing theory and evidence abstractthere has been substantial growth in rates of new car leasing over the last few decades building on recent theoretical research we construct a model of the leasing decision in which leasing mitigates adverse selection and reduces transaction costs but moral hazard limits its use in our model the prevalence of leasing is related to new car reliability which suggests that the recent growth in leasing is at least partly due to improvements in new car reliability we use this model to derive testable implications and then conduct an empirical analysis to investigate whether the operation of the new and used car markets is consistent with the predictions of this theoretical approach our empirical results support the theoretical predictions of our model in particular we provide direct evidence that leasing mitigates adverse selection and that an important factor in the growth in new car leasing rates has indeed been the growth of new car reliability

the impact of supply constraints on house prices in england we test the theoretical prediction that house prices respond more strongly to changes in local earnings in places with tight supply constraints using a unique panel dataset of 353 local planning authorities in england between 1974 and 2008 exploiting exogenous variation from a policy reform vote shares and historical density to identify the endogenous constraints measures we find that regulatory constraints have a substantive positive impact on the house price earnings elasticity the effect of constraints due to scarcity of developable land is largely confined to highly urbanised areas and uneven topography has a quantitatively less meaningful impact

unemployment inflation and monetarism a further analysis comment in a recent paper in this review robert van order proposes an interesting simplification of the important model of jerome stein 1974 the purpose of this comment is to correct some errors in van order s analysis to relate his results to stein s later work 1976b c and to analyze the role of these papers in the current debate over the mechanisms and effectiveness of macroeconomic policy for the convenience of the reader and to simplify the necessary references to van order s paper his equations through 7 and relevant notation are reproduced g g actual and expected rates of inflation y real output f indicator of fiscal policy m m nominal and real money supply p w levels of prices and wages v velocity of circulation n growth rate of m x speed of adjustment of expected inflation 9 ratio of bonds to money functions p phillips curve f production function e aggregate demand s aggregate supply r reduced form of e and s van order s equations are as follows

neighborhood externality risk and the homeownership status of properties in contrast to corporate and institutional investors single owner occupiers cannot adequately diversify housing investment risk consequently homeownership should be relatively less likely in places with higher housing investment risk using the american housing survey it is documented that neighborhood externality risk a major component of housing investment risk substantially reduces the probability that a housing unit is owner occupied even when controlling for housing type and numerous location and household specific characteristics the effects are quantitatively meaningful and change in change estimates suggest that the effects are causal

mortgage supply and housing rents we show that a contraction of mortgage supply after the great recession has increased housing rents our empirical strategy exploits heterogeneity in msas exposure to regulatory shocks experienced by lenders over the 2010 2014 period tighter lending standards have increased demand for rental housing and have led to higher rents depressed homeownership rates and an increase in rental supply absent the credit supply contraction annual rent growth would have been 2 1 percentage points lower over 2010 2014 in msas where lending standards rose from their 2008 levels

the housing market s of san diego this paper uses an assignment model to understand the cross section of house prices within a metro area movers demand for housing is derived from a lifecycle problem with credit market frictions equilibrium house prices adjust to assign houses that dier by quality to movers who dier by age income and wealth to quantify the model we measure distributions of house prices house qualities and mover characteristics from micro data on san diego county during the 2000s boom the main result is that cheaper credit for poor households was a major driver of prices especially at the low end of the market

housing demand during the boom the role of expectations and credit constraints i use a life cycle model of housing demand to infer expectations about house prices and home equity requirements for the housing boom of the 2000s from observed household choices expectations and credit constraints are separately identified from the intensive and extensive margins of housing demand the main results are that 1 expected price growth was close to average long run growth 2 home equity requirements were lax initially but tightened after the bust and 3 subjective uncertainty about future price growth was large given the option to default on mortgage debt greater price uncertainty leads to higher optimal household leverage

tax subsidies to owner occupied housing an asset market approach inflation reduces the effective cost of homeownership and raises the tax subsidy to owner occupation this paper presents an asset market model of the housing market and estimates how changes in the expected inflation rate affect the real price of houses and the equilibrium size of the housing capital stock simulation results suggest that the accelerating inflation of the 1970s which substantially reduced homeowners user costs could have accounted for as much as a 30 percent increase in real house prices persistent high inflation rates could lead ultimately to a sizable increase in the stock of owner occupied housing

precaution and liquidity in the demand for housing we exploit cross sectional mortgage data to investigate the importance of liquidity constraints and a precautionary motive in the demand for housing households that are not liquidity constrained consume housing services essentially as the life cycle hypothesis suggests but with a significant precautionary component households that are liquidity constrained in terms of not meeting standard loan to value or payments to income constraints are similar to unconstrained households in most respects including the precautionary motive but they respond somewhat less to fluctuations in their lifetime income suggesting some influence of bank induced liquidity constraints we additionally find however that banks enforce liquidity constraints only weakly jel d91 d12 r21 i introduction the benchmark theory in the economics of consumption is the life cycle or permanent income hypothesis lcpi based on the work of modigliani and brumberg 1954 and friedman 1957 its empirical validity is sometimes questionable especially when compared against alternatives that incorporate liquidity constraints or the precautionary motive for saving see for instance deaton 1992 for a survey rejection of the lcpi may however be just a manifestation of the poor quality of consumption data at the micro level these data are typically subject to the reporting biases and omissions inherent in consumer surveys there are further difficulties in measuring a desired stream of consumption services nondurable consumption goods are a small fraction of total consumption and in the case of food essentials hardly a consumer choice variable durable consumption goods have the feature that they are lumpy and that the consumption services at any point in time are hard to measure we propose to test the lcpi at the micro level with a quite different type of data the data are obtained from the residential mortgage finance database collected by the national association of realtors they are based on actual home purchases and the associated mortgage transactions reported by realtors and thus avoid some of the reporting biases of the consumer surveys more important they allow us to accurately identify households that in principle have instantaneous access to additional liquidity by lowering the down payment for the house purchase or increasing the size of the loan further the purchase of a house provides an accurate measure of a relatively large fraction of consumption services obtained for a medium to long horizon and measured at the time of the consumption decision although our data also have some serious shortcomings they allow a look at the lcpi from an unconventional vantage point perhaps the most influential study employing the standard consumer survey in testing the lcpi at the micro level is that of hall and mishkin 1982 it examines food expenditure from the panel study of income dynamics one of their key results is that consumption tracks income more closely than would be expected under the lcpi they demonstrate that this result could be explained by assuming a group of liquidity constrained consumers consuming their income at each point in time of 20 of the total sample some of the drawbacks of this study are the use of food expenditures to represent consumption the underreporting of income and absence of proper wealth data inherent in the consumer survey and the associated inability to individually separate liquidity constrained consumers from the rest of the sample several previous studies have attempted to improve on this way of testing the lcpi by examining other data sets bernanke 1984 used data on durable consumption goods automobiles to overcome the drawbacks of using food consumption in the hall and mishkin study his results support the lcpi but are still suspect because of possible reporting biases and the lack of good wealth and savings observations

portfolio choices for homeowners abstract in this paper i show that introducing frictions associated with housing into standard life cycle models can partially resolve the portfolio choice puzzle i calibrate a model in which a representative household endogenously transits from renting to mortgage financed homeownership the household can later adjust housing status either voluntarily or because of a forced move by paying transaction costs it is shown that homeownership crowds out stock market participation risky owner occupied housing substitutes for stocks while bonds provide liquidity young and middle aged households regardless of whether they are currently homeowners hold much less stock than predicted by traditional models without housing

mortgage default during the u s mortgage crisis this paper asks which theories of mortgage default are quantitatively consistent with observations in the united states during 2002 2010 theoretical models are simulated for the observed time series of aggregate house prices their predictions are then compared to actual default rates on prime fixed rate mortgages an out of sample test discriminates between estimated reduced forms of the two most prominent theories the test reveals that the doubletrigger hypothesis attributing mortgage default to the joint occurrence of negative equity and a life event like unemployment outperforms a frictionless option theoretic default model based on this finding a structural partialequilibrium model with liquidity constraints and idiosyncratic unemployment shocks is presented to provide micro foundations for the double trigger hypothesis in this model borrowers with negative equity are more likely to default when they are unemployed and have low liquid wealth the model explains most of the observed strong rise in mortgage default rates a policy implication of the model is that subsidizing homeowners can mitigate a mortgage crisis at a lower cost than bailing out lenders

mortgage debt consumption and illiquid housing markets in the great recession using a model with housing search endogenous credit constraints and mortgage default this paper accounts for the housing crash from 2006 to 2011 and its implications for aggregate and cross sectional consumption during the great recession left tail shocks to labor market uncertainty and tighter down payment requirements emerge as the key drivers an endogenous decline in housing liquidity amplifies the recession by increasing foreclosures contracting credit and depressing consumption balance sheets act as a transmission mechanism from housing to consumption that depends on gross portfolio positions and the leverage distribution low interest rate policies accelerate the recovery in housing and consumption

house prices and credit constraints making sense of the us experience most us house price models break down in the mid 2000s due to the omission of exogenous changes in mortgage credit supply associated with the sub prime mortgage boom from house price to rent ratio and inverted housing demand models previous models lack data on credit constraints facing first time home buyers incorporating a measure of credit conditions the cyclically adjusted loan to value ratio for first time buyers into house price to rent ratio models yields stable long run relationships more precisely estimated effects reasonable speeds of adjustment and improved model fits

depreciation of housing capital maintenance and house price inflation estimates from a repeat sales model abstract the rate at which physical capital depreciates is fundamental to investment in the economy nevertheless although housing capital accounts for one third of the total capital stock the rate at which housing capital depreciates has only rarely been directly estimated in part because prior studies do not control for maintenance for that same reason widely publicized measures of house price appreciation overstate the capital gain from homeownership using data from the american housing survey we examine these issues over the 1983 to 2001 period results indicate that gross of maintenance housing depreciates at roughly 2 5 percent per year while net of maintenance housing depreciates at approximately 2 percent per year moreover although the typical home appreciated at an annual real rate of roughly 0 75 percent after allowing for depreciation and maintenance the average homeowner experienced little capital gain

a model of mortgage default in this paper we solve a dynamic model of households mortgage decisions incorporating labor income house price inflation and interest rate risk using a zero profit condition for mortgage lenders we solve for equilibrium mortgage rates given borrower characteristics and optimal decisions the model quantifies the effects of adjustable versus fixed mortgage rates loan to value ratios and mortgage affordability measures on mortgage premia and default mortgage selection by heterogeneous borrowers helps explain the higher default rates on adjustable rate mortgages during the recent u s housing downturn and the variation in mortgage premia with the level of interest rates

the effect of used markets with endogenous replacement of durable goods the purpose of this paper is to examine the effect of used asset markets for a particular class of durable goods markets where replacement and trading ages are endogenous and where the imperfect substitutability between new and used goods results from the heterogeneity of buyers durable goods are assumed to be like automobiles the quality of the service declines with the age of the durable but the time at which the durable is traded and replaced with a new one is a choice variable for the owner as in my earlier work on heterogeneous buyers 3 it is assumed that the decline in service value with age is lower for some buyers so that these buyers will specialize in used assets in the presence of used markets however this paper departs from previous work by allowing the retirement age and the age at which goods are traded in the used market to be endogenously determined this extension has important implications because it will be shown that retirement age durability will be affected by the presence of used asset markets this paper examines the question of whether a competitive industry will favor a ban on used markets previous authors 2 6 8 have examined this question in markets where durable goods are like textbooks the used asset markets exist because the length of the demand for services by the purchaser is less than the lifetime of the durable in these models the presence of a used asset market is equivalent to a lengthening of the lifetime of the good however in the model of this paper the opening of a used asset market results in uniformity of the lifetime of the durable good since all of the oldest durables will be held by the user type that places the highest value on old durables this uniform retirement age with the used market will be shown to lie between the retirement ages adopted by the two user types when there are no used markets thus the average age of the stock of durables could rise or fall with the introduction of used markets second the model of this paper allows for the analysis of restrictions on used markets that raise the cost of used market transactions but do not eliminate trading it will be shown that the effects of a per unit tax on used market transactions will differ from that of an ad valorem tax because of the greater incentive created by an ad valorem tax to postpone used market transactions this result is in the spirit of barzel s 1 result that the form of the tax is important because different types of taxes may affect characteristics of the good in different ways in the present context goods

the democratization of credit and the rise in consumer bankruptcies financial innovations are a common explanation for the rise in credit card debt and bankruptcies to evaluate this story we develop a simple model that incorporates two key frictions asymmetric information about borrowers risk of default and a fixed cost of developing each contract lenders offer innovations that ameliorate asymmetric information or reduce this fixed cost have large extensive margin effects via the entry of new lending contracts targeted at riskier borrowers this results in more defaults and borrowing and increased dispersion of interest rates using the survey of consumer finances and federal reserve board interest rate data we find evidence supporting these predictions specifically the dispersion of credit card interest rates nearly tripled while the new cardholders of the late 1980s and 1990s had riskier observable characteristics than existing cardholders our calculation suggest these new cardholders accounted for over 25 of the rise in bank credit card debt and delinquencies between 1989 and 1998

mortgage choice in the euro area macroeconomic determinants and the effect of monetary policy on debt burdens this paper provides novel evidence on the role of the macroeconomic environment for households choice between fixed interest rate and adjustable interest rate mortgages arms in the euro area we find that relatively more arms are taken out when economic growth is strong the interest rate spread is high or unemployment shows low volatility a simulation exercise shows that a reduction in mortgage rates as witnessed during the monetary easing in the course of the global financial crisis produces a substantial decline in debt burdens among mortgage holding households especially in countries where households have higher debt burdens and a larger share of arms

a model of housing in the presence of adjustment costs a structural interpretation of habit persistence building on the model of sanford j grossman and guy laroque 1990 this paper provides a model of household consumption and portfolio allocation which incorporates the role of housing as both a consumption good and as a component of wealth the model captures the following features of the household s problem a utility depends probably nonseparably on two distinct goods nondurable consumption and housing b nondurable consumption can be adjusted cost lessly but housing is subject to an adjustment cost c households face housing price risk in the sense that the relative price of housing varies over time and d in addition to the house the household can invest in a wide variety of financial assets this single reasonably tractable model generates testable implications for portfolio allocation risk aversion asset pricing and the dynamics of nondurable consumption because the original grossman and laroque model considers a utility function in which the durable good is the sole argument and thus abstracts completely from nondurable consump tion their analysis cannot address either the potential spillover effects of the adjustment costs of the durable good on the dynamics of nondurable consumption or the implications for portfolio allocation of housing risk arising from variation in the relative price of housing in addition to generating implications for issues on which the original grossman and laroque model was silent the housing model delivers a strikingly different message concerning asset pricing that is in contrast to the grossman and laroque result that the consumption based capital asset pricing model consumption capm fails the housing model implies that the consumptioncapm holds we assume that the household incurs an adjustment cost when altering the holding of the dura ble good or house although financial assets can be bought and sold costlessly consumption of the nondurable good can also be adjusted costlessly when choosing a new house the consumer takes into account the fact that the consumption of housing services will be constant at the new level until the subsequent stopping time when it is again worthwhile to incur the adjustment cost thus the home purchase decision is endogenous and fully rational but because of the adjustment cost infrequent in this continuous time setting the household s decision process has a recursive structure at each instant the household first decides whether it is optimal to sell the house immediately on those rare occasions that it is optimal to incur the adjustment cost the household sells the old house and buys a new one instantaneously if the household decides that it is not optimal to sell the house immediately it then determines its optimal holdings of financial assets and optimal level of nondurable consumption conditional on the current housing stock in essence because of the adjustment costs associated with the durable good the current

housing and location choices of retiring households evidence from france in this paper a study is made of the mobility and housing choices of the elderly when retiring using household data collected in france from a theoretical viewpoint individuals are likely to decrease their housing quantity because of an income loss when retiring but they may also increase it to benefit from more housing comfort for leisure using the 1992 trois generations survey it is first shown that housing mobility at retirement is substantial in france with a variety of self reported motives then using the 1994 2001 french europanel survey evidence is found of both upsizing and downsizing for mobile recent retirees in many cases housing adjustments lead to a correction of the initial disequilibrium between the number of rooms and the number of occupants however a significant proportion of mobile recent retirees improve the quality of their dwelling

distributional implications of government guarantees in mortgage markets we analyze the removal of the credit risk guarantees provided by the government sponsored enterprises gses in a model with agents heterogeneous in income and house price risk we find that wealth inequality increases driven by higher mortgage spreads and housing rents housing holdings become more concentrated foreclosures fall the removal benefits high income households while hurting low and mid income households renters and highly leveraged mortgagors with conforming loans gse reform requires compensating transfers sufficiently high elasticity of rental supply or linking gse reform with the elimination of the mortgage interest deduction

measuring the external benefits of homeownership abstract the subsidization of homeownership is justified on efficiency grounds only to the extent that it provides benefits to people other than the homeowner we use the clustered neighborhoods subsample in the american housing survey to measure that benefit in the form of higher housing prices in neighborhoods with higher ownership rates and lower vacancies we attempt to account for unobservable neighborhood and house attributes that may be correlated with occupancy and ownership through instrumental variables switching regressions and panel methods estimates indicate that a housing transition from renting to owning creates approximately 1300 in measured benefits

recourse and residential mortgage default evidence from us states we quantify the effect of recourse on default and find that recourse affects default by lowering the borrower s sensitivity to negative equity at the mean value of the default option for defaulted loans borrowers are 30 more likely to default in non recourse states furthermore for homes appraised at 500 000 to 750 000 borrowers are twice as likely to default in non recourse states we also find that defaults are more likely to occur through a lender friendly procedure such as a deed in lieu in states that allow deficiency judgments we find no evidence that mortgage interest rates are lower in recourse states the author 2011 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

house prices borrowing constraints and monetary policy in the business cycle i develop a general equilibrium model with sticky prices credit constraints nominal loans and asset prices changes in asset prices modify agents borrowing capacity through collateral value changes in nominal prices affect real repayments through debt deflation monetary policy shocks move asset and nominal prices in the same direction and are amplified and propagated over time the financial accelerator is not constant across shocks nominal debt stabilises supply shocks making the economy less volatile when the central bank controls the interest rate i discuss the role of equity debt indexation and household and firm leverage in the propagation mechanism finally i find that monetary policy should not target asset prices as a means of reducing output and inflation volatility

leasing lemons and moral hazard abstract a number of recent papers have analyzed leasing in the new car market as a response to the adverse selection problem in the used car market originally explored in the seminal 1970 paper by george akerlof in this paper we consider a model characterized by both adverse selection as in these earlier papers and moral hazard concerning the maintenance choices of new car drivers we show that this approach provides explanations for a number of empirical findings concerning real world new and used car markets including that leasing has become more popular over time very high income new car drivers lease more and used cars that were leased when new sell for more than used cars that were purchased when new we also compare and contrast our approach to new car leasing with alternative approaches

leaning against boom bust cycles in credit and housing prices this paper studies the potential gains of monetary and macro prudential policies that lean against house price and credit cycles we rely on a model that features borrowers and savers and allows for over borrowing induced by news shock driven cycles we find that policy that responds to changes in financial variables is socially optimal considering the use of a single policy instrument both types of agents are better off when the interest rate optimally responds to credit growth when we allow for the implementation of both interest rate and ltv policies heterogeneity in the welfare implications is key in determining the optimal use of policy instruments the optimal policy for the borrowers is characterized by a ltv ratio that responds countercyclically to credit growth which most effectively stabilizes credit relative to gdp in contrast the optimal policy for the savers features a constant ltv ratio coupled with an interest rate response to credit growth news shock driven cycles account for most of the gains from a policy response to changes in financial variables

mortgage risks debt literacy and financial advice a limited understanding of mortgage contracts and the risks involved may have contributed to the outbreak of the 2007 2008 financial crisis we developed a special questionnaire relating mortgage loan decisions to financial knowledge and financial advice our results demonstrate that homeowners appear to be well aware of mortgage risks large loans relative to home value are perceived as riskier as are loans with large mortgage payments relative to income and loans linked to investment vehicles homeowners with riskier mortgages indicated that they could encounter financial problems should house prices or their income decline homeowners with relatively low debt literacy are more likely to take out traditional mortgages with principal repayments over the maturity of the loan riskier mortgages are more prevalent among homeowners with a better understanding of loan contracts financially less sophisticated homeowners consulting mortgage brokers too hold riskier mortgages

tenure neutral and equitable housing taxation equity and neutrality are distinct concepts in housing taxation and weak and strong tenure neutrality should be distinguished when a tax system is tested for those criteria the taxes paid by landlords must be included as they affect the rents renters pay this paper defines appropriate tests applies them to a stylised tax system and proposes tax changes designed to restore tenure equity and or neutrality it shows how the homeowner s implicit income should be computed for taxes to be fundamentally tenure neutral or equitable or both it also shows the key role played by the cost differential in producing housing services under owner occupation and renting

macroprudential and monetary policies implications for financial stability and welfare in this paper we analyze the implications of macroprudential and monetary policies for business cycles welfare and financial stability we consider a dynamic stochastic general equilibrium dsge model with housing and collateral constraints a macroprudential rule for the loan to value ratio ltv which responds to credit growth interacts with a traditional taylor rule for monetary policy we compute the optimal parameters of these rules both when monetary and macroprudential policies act in a coordinated and in a non coordinated way we find that both policies acting together unambiguously improves the stability of the system in both cases this interaction is welfare improving for the society especially in the case of the non coordinated game there is though a trade off between borrowers and savers however borrowers can compensate the saver s welfare loss view the mathml sourcela kaldor hicks to achieve a pareto superior outcome

effects of homeownership on household savings abstract causal effects of homeownership decisions on the level and composition of household savings accumulation are estimated genuine positive impacts on both total and nonhousing savings as a function of house value chosen are found the findings suggest however that the homeownership decision in conjunction with choice of an average owner occupied house value does not substantially alter the total amount of accumulated household savings

buying a home with a resale value location location location we develop a dynamic multiregion model where a household s choice of housing location depends on its current wealth and its current type and involves both consumption and investment considerations the relative strength of the consumption motive and the investment motive determines the equilibrium pattern of residential sorting a strong investment consumption motive implies sorting according to household type wealth the model predicts that large house price fluctuations are associated with a low degree of sorting by type this prediction is consistent with evidence from us metropolitan areas when income education and age are used as proxies for household type

non durable consumption and housing net worth in the great recession evidence from easily accessible data abstract in an influential paper mian rao and sufi 2013 exploit geographic variation to measure the effect of the fall in housing net worth on household expenditures during the great recession their widely cited estimates are based on proprietary house price and proprietary expenditure data and therefore not easily replicable we use alternative data on a subset of non durable goods and on house prices which are more easily accessible to replicate their study when estimating their same specification on our data we obtain values for the elasticity of expenditures to the housing net worth shock that are virtually indistinguishable from theirs however our robustness analyses with respect to alternative model specifications yield more nuanced conclusions about the separate roles of house prices and initial housing exposure leverage for the drop in expenditures moreover the estimated elasticity is consistent theoretically and quantitatively with a simple calibrated model with wealth effects where leverage and credit constraints play no role

homeownership in the 1980s and 1990s aggregate trends and racial gaps abstract housing policy under the clinton and bush administrations has sought to boost homeownership while also narrowing racial gaps in owner occupancy rates against that backdrop homeownership rose sharply in the 1990s but white minority gaps remain in excess of 25 percentage points we analyze these patterns using data from the 1983 to 2001 survey of consumer finances results indicate that household characteristics explain most of the increase in homeownership and roughly two thirds of the white minority homeownership gap credit barriers account for no more than 5 percentage points of the remaining gap this suggests that policy makers will need to look beyond innovations in mortgage finance if their goal is to further expand homeownership

two extensive margins of credit and loan to value policies author s gete pedro reher michael abstract we analyze a model of mortgage markets housing tenure choice heterogeneous agents and default with closed form solutions we uncover new insights which may inspire empirical work and we ground already established insights in a series of tractable expressions then we study optimal loan to value ltv regulation and show that the choice of an ltv cap should balance the opposing forces of access to homeownership and the negative externalities associated with default homeownership affordability concerns induce procyclical elements into optimal regulation which attenuate the countercyclical regulation justified by the negative default externalities

macroeconomic effects of the mortgage refinance and the home equity lines of credit abstract i examine how the mortgage refinance and the home equity lines of credit heloc impact the increase in pre crisis mortgage debt and post crisis mortgage defaults financially constrained homeowners can cash out funds through refinancing mortgages or extract home equity through heloc my quantitative exercise shows that prevalent usage of refinancing increases pre crisis mortgage debt which amplifies the post crisis foreclosure rate heloc also contributes to an increase in mortgage defaults though it negligibly impacts pre crisis mortgage debt

labor income uncertainty skewness and homeownership a panel data study for germany and spain abstract in this paper we empirically investigate the effect of labor income uncertainty on the probability of homeownership in germany and spain this study is motivated by two facts firstly theoretical models tend to provide ambiguous results on this issue secondly previous empirical evidence focuses exclusively on the us housing market to carry out our analysis we propose more precise income uncertainty measures based on panel data labor income equations we observe that households facing high levels of income uncertainty display a preference for renting while those located in more positively skewed income distributions show a greater propensity for homeownership

phasing out the gses we develop a new model of the mortgage market where both borrowers and lenders can default risk tolerant savers act as intermediaries between risk averse depositors and impatient borrowers the government plays a crucial role by providing both mortgage guarantees and deposit insurance underpriced government mortgage guarantees lead to more and riskier mortgage originations as well as to high financial sector leverage mortgage crises occasionally turn into financial crises and government bailouts due to the fragility of the intermediaries balance sheets increasing the price of the mortgage guarantee crowds in the private sector reduces financial fragility leads to fewer but safer mortgages lowers house prices and raises mortgage and risk free interest rates due to a more robust financial sector consumption smoothing improves and aggregate welfare increases while borrowers are nearly indifferent to a world with or without mortgage guarantees savers are substantially better off while aggregate welfare increases so does wealth inequality jel g12 g15 f31

housing tenure choice in transitional urban china a multilevel analysis summary using a 1996 national survey of housing in china and a multilevel modelling technique we examine housing tenure choice in transitional urban china where households have been granted limited freedom of choice in the housing market since the housing reforms of 1988 we e nd that both market mechanisms and institutional forces affect households tenure choice in urban china while some socioeconomic factors such as age household size household income and housing price have similar effects on tenure choice as in the west others such as the number of workers and marital status have rather different effects in addition factors characterising institutional relationships among the state work units and households such as hukou job rank and work unit rank still play important roles in tenure choice

extending environmental management beyond the firm boundaries an empirical study of dutch food and beverage firms consumer demand for environmental sustainability and for affordable prices calls for cooperation and information exchange in food chains to reduce joint environmental impact known as externally oriented environmental management e em e em is increasingly regarded as a management tool to simultaneously improve environmental operational and business performance understanding the factors that influence managers to develop e em helps to design environmentally and economically sustainable food chains the prior research regarding these factors is not exhaustive and demanded a multi period approach this study expands the understanding of the factors that influence managers to develop e em with a multi period empirical research we address the effects of external institutional pressures regulative normative and culturally cognitive and the level of in company environmental management i em on e em which involves information exchange in the chain cooperation with suppliers and customers the analysis relies on survey data of 255 and 96 dutch food and beverage f b processors from 2002 and 2010 respectively the findings indicate that respondents have considerably improved i em over time i em requires in company pzrocedures ranging from environmental strategy formulation to the managerial review of achieved results to assure continuous improvement of environmental performance f b processors that had already achieved a high level of i em are more likely to develop e em also growing normative and culturally cognitive pressures from supply chain partners and increasingly from long term public private environmental covenants significantly influenced e em implementation however regulative pressure from public authorities had no impact it appeared that e em is influenced mostly by institutional pressures when the firms are less experienced with i em

market thickness and the impact of unemployment on housing market outcomes abstract a search and matching model is developed to study how unemployment influences the housing market in the presence of the thick market effect a structural estimation of the model is conducted based on texas city level data that covers three years 1990 2000 and 2010 simulations help clarify how much the thick market effect amplifies the impact of unemployment a three percentage point increase in the unemployment rate lowers the price by 10 74 and reduces the transaction volume by 5 49 incorporating a feedback mechanism from housing prices to unemployment strengthens the amplification magnitude of the thick market effect

industrial long term agreements on energy efficiency in the netherlands a critical assessment of the monitoring methodologies and quantitative results abstract long term agreements ltas with industry were added to the mix of energy policy instruments in the netherlands at the beginning of the 1990s within a few years these agreements have become very important for the industrial energy conservation policy in this study we assessed the extent to which the targets set out by the government were achieved to this end we studied 1 whether the original policy targets for industry were adequately translated to the contracted ltas 2 whether the ltas achieved the contracted goals and 3 whether the monitoring methodologies that were developed ensure a complete comparable and objective monitoring of the energy intensity developments in manufacturing industry the policy target for manufacturing industry was to decrease energy intensity by 19 in the period 1989 2000 excluding feedstocks it turned out to be possible to contract ltas that cover 72 75 of the energy consumption in manufacturing industry the average of the contracted lta targets amounts to an 18 intensity decrease the average goal achievement of the ltas in the period 1989 1997 turned out to be in accordance with the contracted targets although more than half of the lta sectors are lagging behind the agreed rate of intensity decrease for each of the ltas a monitoring methodology was developed some aspects of these monitoring methodologies have resulted in the fact that the lta monitoring does not ensure a comparable and objective monitoring of the energy intensity results in the ltas overall we conclude that the monitoring of the energy intensity developments in the long term agreements sectors is insufficiently transparent we recommend a stricter enforcement of uniform monitoring requirements in a new generation of ltas and independent supervision and verification of the monitoring results

leverage and the foreclosure crisis how much of the foreclosure crisis can be explained by the large number of high leverage mortgages originated during the housing boom in our model heterogeneous households select from mortgages with different down payments and choose whether to default given income and housing shocks the use of low down payment loans is initially limited by payment to income requirements but becomes unrestricted during the boom the model approximates key housing and mortgage market facts before and after the crisis a counterfactual experiment suggests that the increased number of high leverage loans originated prior to the crisis can explain over 60 percent of the rise in foreclosure rates

voluntary agreements in environmental policy an empirical evaluation for the chilean case abstract in this paper the author assesses and discusses the chilean approach on voluntary environmental agreements based on a survey questionnaire performed in 322 facilities belonging to four industrial sectors the author evaluated the effectiveness and static efficiency of five voluntary agreements vas using the propensity score method the study found out that vas had a significant effect in encouraging the implementation of environmental initiatives although most of them represent incremental rather than radical improvements moreover whilst it confirms that vas can suffer from regulatory capture it also reveals that capture can coexist with significant environmental improvements in other areas regarding the static efficiency impact it suggests that vas succeeded in encouraging cost minimization in terms of operational and transaction costs furthermore this research documented that participation in an industrial association is by far the most significant variable associated with voluntary agreements and that regulatory threats and governmental funding are incentives of secondary importance finally it concludes by highlighting that the lack of public participation together with several institutional and political factors that subdue the ambitiousness of targets are the most serious drawbacks which should be addressed in order to avoid credibility issues of vas in the near future

dutch sectoral energy intensity developments in international perspective 1987 2005 this paper makes use of a new dataset to investigate energy intensity developments in the netherlands over the period 1987 2005 the dataset allows for a comparison with 18 other oecd countries a key feature of our analysis is that we combine a cross country perspective with a high level of sectoral detail covering 49 sectors particularly innovative is our evaluation of energy intensity developments in a wide range of service sectors we find that across sectors energy intensity levels in the netherlands on average decreased only marginally and increased in services this performance is in general worse than the oecd average especially between 1987 and 1995 changes in the sectoral composition of the economy play an important role in explaining aggregate trends in the manufacturing sector about half of the efficiency improvements were undone by a shift towards a more energy intensive industry structure in contrast in the service sector efficiency decreased which was undone for about one third by a shift towards a less energy intensive sector structure

houses as atms mortgage refinancing and macroeconomic uncertainty we estimate a structural model of household liquidity management in the presence of long term mortgages households face counter cyclical idiosyncratic labor income uncertainty and borrowing constraints which aect optimal choices of leverage precautionary saving in liquid assets and illiquid home equity debt repayment mortgage renancing and default taking the observed historical path of house prices aggregate

the transition to home ownership and the black white wealth gap this paper analyzes differences in the likelihood that black and white families become homeowners by following a sample of black and white renters over time we are able to separately study racial differences in the likelihood of applying for a mortgage and in the likelihood that a mortgage application is accepted although its effect on the race gap in housing transitions is small we find strong evidence that black applicants are almost twice as likely as comparable white households to be rejected even when credit history proxies and measures of household wealth are accounted for we show that the housing transition gap exists primarily because blacks are less likely to apply for mortgages in the first place the analysis suggests that differences in income family structure and in the ability and willingness of parents to provide down payment assistance are the primary reasons for this applications gap we speculate that the portion of the gap that remains unexplained after controlling for income d

policies influencing cleaner production the role of prices and regulation abstract low prices of inputs low costs associated with non product outputs and poor regulatory forcing have often not been conducive to diffusion of cleaner production however developments may be noted in the field of taxation subsidies liability and permits that tend to be more favourable to cleaner production extension thereof may favour cleaner production more in the future cleaner production stands to gain much by slashing subsidies and substantial ecotaxation of inputs and non product outputs similarly the regulatory enforcement of best available technologies liability for waste and tradable permits may help the diffusion of cleaner production

the impact of mortgage interest rate subsidies on household borrowing abstract the responsiveness of household borrowing to changes in the interest rate is a crucial parameter for assessing public policies aimed at promoting saving we estimate the effect on household borrowing of a reform of a program that subsidized interest rates on mortgages signed by medium and low income households the reform established a ceiling in the price of the house that could be financed with the program first we use triple difference estimators exploiting the fact that the reform should affect most the borrowing behavior of eligible individuals living in high price areas and estimate that the elasticity of the probability getting a loan to the interest rate lies between 2 8 and 1 3 second we document that after the reform the distribution of loan sizes became more concentrated at the discontinuity point of the budget constraint of eligible individuals both findings are consistent with a negative response of household borrowing to increases in interest rates

joint dynamics of house prices and foreclosures this paper studies the joint transitional dynamics of the foreclosures and house prices in a standard life cycle incomplete markets model with housing and a realistic long term mortgage structure we calibrate our model to match several long term features of the u s housing market and analyze the effects of several unexpected and permanent shocks on the house price and the foreclosure rate both across the steady states and along the transition between the steady states we examine permanent unexpected shocks to the risk free interest rate the minimum down payment ratio and unemployment during the transition these shocks create large movements in house prices more importantly the foreclosure dynamics are quite significant along the transition compared to the steady state changes and there are strong feedbacks between foreclosures and house prices we assess the effects of a temporary reduction in the risk free interest rate which has moderate effects on house prices but little effect on foreclosure dynamics we also study the effects of an ex ante macroprudential policy which establishes a minimum down payment requirement at a higher threshold such a macroprudential policy helps substantially stabilize both house prices and foreclosures

loan originations and defaults in the mortgage crisis the role of the middle class this paper highlights the importance of middle class and high fico borrowers for the mortgage crisis contrary to popular belief which focuses on subprime and poor borrowers we show that mortgage originations increased for borrowers across all income levels and fico scores the relation between mortgage growth and income growth at the individual level remained positive throughout the pre 2007 period finally middle income high income and prime borrowers all sharply increased their share of delinquencies in the crisis these results are consistent with a demand side view where homebuyers and lenders bought into increasing house values and borrowers defaulted after prices dropped

hedging house price risk in the presence of lumpy transaction costs abstract this paper presents a life cycle model of housing demand with uncertain house prices and lumpy transaction costs the paper extends the s s methodology to a non stationary discrete time framework with multivariate stochastic price processes this allows the characterization of a self hedging mechanism in an incomplete housing market households use earlier accumulated housing wealth to hedge against future housing cost risk as a result the direction of the effect of price uncertainty on housing demand depends critically on households future housing consumption plans when price uncertainty increases households consume and thereby invest in less housing if they plan to realize the housing wealth gain however they will instead take a larger housing position if they plan to move to a bigger home in a correlated housing market in the future

upgrades switching costs and the leverage theory of tying this article investigates the role of product upgrades and consumer switching costs in the tying of complementary products previous analyses have found that a monopolist of one product will not increase its profits and reduce social welfare by tying and leveraging its monopoly position into a complementary market if the initial monopolised product is essential where essential means that all uses of the complementary good require the initial monopolised product we show that this is not true in settings characterised by product upgrades and consumer switching costs we also discuss various extensions including the role of the reversibility of tying

should i default on my mortgage even if i can pay experimental evidence abstract we study strategic default in the laboratory i e in a controlled experiment subjects are initially endowed with a house and a mortgage we use neutral wording in the experiment and must decide at each period in which their mortgage is alive among three options making the mortgage payment selling the house or walking away from their house and defaulting on their mortgage at each point in time we can observe whether defaulters can afford to make the mortgage payment and thus directly compute the number of strategic defaulters subjects default in the right periods and quite fast learn what they should consume we find experimental support for the double trigger hypothesis individuals faced with low income and low house prices are more likely to default we observe that subjects default less than optimal and this decision is significantly affected by social norm concerns in the context of the experiment individuals under consume in the first periods of life they are cautious when indebted both introducing a 50 probability of recourse and a responsible homeowner reward are very effective in preventing default in the lab especially by individuals receiving a bad shock to income when house prices are low

to buy or not to buy consumer constraints in the housing market abstract we use a strategic household survey to study the sensitivity of intended homeownership decisions to financing constraints we find that the average stated likelihood of buying a home is strongly sensitive to the size of the required down payment which we vary exogenously across three scenarios this sensitivity is particularly high for respondents that appear more liquidity constrained based on observable characteristics including current renters or owners with low savings or low home equity for renters expectations of future rent inflation and of improvements to their personal financial situation also predict intention to buy

intergenerational redistribution in the great recession in this paper we construct a stochastic overlapping generations general equilibrium model in which households are subject to aggregate shocks that aect both wages and asset prices we use a calibrated version of the model to quantify how the welfare costs of severe recessions are distributed across dierent household age groups the model predicts that younger cohorts fare better than older cohorts when the equilibrium decline in asset prices is large relative to the decline in wages asset price declines hurt the old who rely on asset sales to nance consumption but benet the young who purchase assets at depressed prices in our preferred calibration asset prices decline more than twice as much as wages consistent with the experience of the us economy in the great recession a model recession is approximately welfare neutral for households in the 20 29 age group but translates into a large welfare loss of around 10 percent of lifetime consumption for households aged 70 and over

the effects of price risk on housing demand empirical evidence from u s markets this article examines how price risk affects housing demand it identifies two relevant channels a financial risk effect that reduces demand and a hedging effect that increases demand since current homes may hedge future housing costs the latter dominates when hedging incentives are strong namely when the likelihood of moving up the housing ladder is high and the tendency to move across markets is low for households with weak hedging incentives the article finds negative effects of price risk on the timing and size of home purchases but positive effects for households with strong hedging incentives

the demand for housing in spain an endogenous switching regression analysis housing demand in spain has been studied by using data disaggregated into primary and secondary housing demands it is found that demand for both types of housing area indeed related and that they are both considered necessities thus suggesting that their consumption ought to be modelled as a joint decision moreover it is found that traditional determinants of housing demand affect primary and secondary home demands differently these differences are attributable to the following economic rationales need for asset holdings diversifications relative high cost of home ownership versus rental in choice locations and differences in land demand intensity across regions in sum the findings suggest that policy makers in spain contrary to popular beliefs must consider secondary homes an integral part of households accommodation need

the relation between financial and housing wealth evidence from dutch households abstract we analyze households joint investment decisions for financial wealth and homes we use a bivariate censored regression model with endogenous switching fixed costs or transaction costs are captured by an unobserved nonzero censoring threshold the model allows for spillover effects of a binding threshold for one asset on the demand for the other asset we find that tenure choice affects the level of financial wealth our results do not support the view that people first accumulate financial wealth before acquiring homes this can be due to the absence of down payment constraints in the netherlands

unemployment inflation and monetarism the council s report provides a look at the 1969 71 game plan to disinflate by means of retarding aggregate demand the president elect s task force on inflation recommended as a first interim step that aggregate demand be slowed so as to bring the unemployment rate back to some equilibrium region around 4 5 percent what happened was that under the cover of the expectation and acceptance of such a limited step towards re equilibration the administration gradually tightened monetary and fiscal policy so severely as gradually to send the unemployment rate whizzing past the equilibrium zone to around 6 percent to my knowledge the theory of how and how well this medicine would act to cure the patient of his inflation was never spelled out by the council of economic advisers pp 533 34