House prices and credit constraints: making sense of the U.S. experience

Duca, John V., Muellbauer, John and Murphy, Anthony (2011) House prices and credit constraints: making sense of the U.S. experience. SERC Discussion Papers (SERCDP0077). Spatial Economics Research Centre (SERC), London School of Economics and Political Science, London, UK.

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Abstract

Most US house price models break down in the mid-2000's, 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.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://www.spatialeconomics.ac.uk/SERC/publication...
Additional Information:	© 2011 The Authors
Divisions:	Spatial Economics Research Centre
Subjects:	H Social Sciences > HC Economic History and Conditions
JEL classification:	C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C51 - Model Construction and Estimation C - Mathematical and Quantitative Methods > C5 - Econometric Modeling > C52 - Model Evaluation and Selection E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E51 - Money Supply; Credit; Money Multipliers G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R31 - Housing Supply and Markets
Date Deposited:	29 Jul 2014 14:04
Last Modified:	11 Dec 2024 19:06
Funders:	Economic and Social Research Council, Department for Business, Innovation & Skills (BIS), Welsh Assembly Government
URI:	http://eprints.lse.ac.uk/id/eprint/58441

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