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Do Changes in Mortgage Credit Constraints Explain the Housing Boom and Bust?
Abstract: This paper documents patterns in US mortgage debt and home ownership in recent decades and explores how well changes in mortgage credit constraints can explain these changes. The age-adjusted home ownership rate declined slightly between 2000 and 2007, but the real stock of residential mortgage debt doubled. Since 2007, age-adjusted home ownership rates have trended down significantly as has the real stock of residential mortgage debt. The paper builds an equilibrium life-cycle model of tenure and mortgage choice that shows that a relaxation of the Loan-to-Value (LTV) constraint increases the homeownership rate for young, high-income households.
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https://fraser.stlouisfed.org/title/tipping-points-iii-debt-financed-homeownership-evolution-impact-future-9374/changes-mortgage-credit-constraints-explain-housing-boom-bust-685760
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Provider: Federal Reserve Bank of St. Louis
Part of Series: Community Development Publications and Reports
Publication Date: 2018-10-01
Pages: 58 pages