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Working Paper
The Effect of Interest Rates on Home Buying : Evidence from a Discontinuity in Mortgage Insurance Premiums
Bhutta, Neil; Ringo, Daniel R. (2017-08-17)
We study the effect of interest rates on the housing market by taking advantage of a sudden and unexpected price change in a large government mortgage program. The Federal Housing Administration (FHA) insures most mortgages to lower-downpayment, lower credit score borrowers, including a majority of first-time homebuyers. The FHA charges borrowers an annual mortgage insurance premium (MIP), and in January, 2015 the FHA abruptly reduced the MIP, and thus FHA borrowers? effective interest rate, by 50 basis points. Using a regression discontinuity design, we find that the MIP reduction increased ...
Finance and Economics Discussion Series , Paper 2017-086

Working Paper
Student Loans and Homeownership
Mezza, Alvaro A.; Ringo, Daniel R.; Sherlund, Shane M.; Sommer, Kamila (2016-02-12)
We estimate the effect of student loan debt on subsequent homeownership in a uniquely constructed administrative dataset for a nationally representative cohort. We instrument for the amount of individual student debt using changes to the in-state tuition rate at public 4-year colleges in the student's home state. A $1,000 increase in student loan debt lowers the homeownership rate by about 1.5 percentage points for public 4-year college-goers during their mid 20s, equivalent to an average delay of 2.5 months in attaining homeownership. Validity tests suggest that the results are not ...
Finance and Economics Discussion Series , Paper 2016-10

Working Paper
Measuring Mortgage Credit Availability : A Frontier Estimation Approach
Anenberg, Elliot; Hizmo, Aurel; Kung, Edward; Molloy, Raven S. (2017-09-29)
We construct a new measure of mortgage credit availability that describes the maximum amount obtainable by a borrower of given characteristics. We estimate this "loan frontier" using mortgage originations data from 2001 to 2014 and show that it reflects a binding borrowing constraint. Our estimates reveal that the expansion of mortgage credit during the housing boom was substantial for all borrowers, not only for low-score or low-income borrowers. The contraction was most pronounced for low-score borrowers. Using variation in the frontier across metropolitan areas over time, we show that ...
Finance and Economics Discussion Series , Paper 2017-101

Working Paper
What are the Perceived Barriers to Homeownership for Young Adults?
Larrimore, Jeff; Schuetz, Jenny; Dodini, Samuel (2016-03-08)
As the U.S. emerges from the Great Recession, there is concern about slowing rates of new household formation and declining interest in homeownership, especially among younger households. Potential reasons that have been posited include tight mortgage credit and housing supply, changing preferences over tenure in the wake of the foreclosure crisis, and weak labor markets for young workers. In this paper, we examine how individual housing choices, and the stated motivations for these choices, reflect local housing affordability and individual financial circumstances, focusing particularly on ...
Finance and Economics Discussion Series , Paper 2016-021

Working Paper
Rural Affordable Rental Housing : Quantifying Need, Reviewing Recent Federal Support, and Assessing the Use of Low Income Housing Tax Credits in Rural Areas
Dumont, Andrew M. (2018-11-14)
Recently, there has been significant interest in the high levels of rental cost burden being experienced across the United States. Much of this scholarship has focused on rental cost burdens in larger urban areas, or at the national level, and has not explored differences in the prevalence of rental cost burden in urban versus rural communities. In this paper, I find that rental cost burdens are a challenge facing both urban and rural communities. However, despite the need for affordable rental housing in rural communities identified, I find the amount of resources made available by the ...
Finance and Economics Discussion Series , Paper 2018-077

Working Paper
Can More Housing Supply Solve the Affordability Crisis? Evidence from a Neighborhood Choice Model
Anenberg, Elliot; Kung, Edward (2018-05-15)
We estimate a neighborhood choice model using 2014 American Community Survey data to investigate the degree to which new housing supply can improve housing affordability. In the model, equilibrium rental rates are determined so that the number of households choosing each neighborhood is equal to the number of housing units in each neighborhood. We use the estimated model to simulate how rental rates would respond to an exogenous increase in the number of housing units in a neighborhood. We find that the rent elasticity is low, and thus marginal reductions in supply constraints alone are ...
Finance and Economics Discussion Series , Paper 2018-035

Working Paper
Monetary Policy, Hot Housing Markets and Leverage
Ungerer, Christoph (2015-05-22)
Expansionary monetary policy can increase household leverage by stimulating housing liquidity. Low mortgage rates encourage buyers to enter the housing market, raising the speed at which properties can be sold. Because lenders can resell seized foreclosure inventory at lower cost in such a hot housing market, ex-ante they are comfortable financing a larger fraction of the house purchase. Consistent with this mechanism, this study documents empirically that both the housing sales rate and loan-to-value ratios increase after expansionary monetary policy. Calibrating a New Keynesian ...
Finance and Economics Discussion Series , Paper 2015-48

Working Paper
Do Mortgage Subsidies Help or Hurt Borrowers?
Rappoport, David (2016-10-05)
Mortgage subsidies affect homeownership costs by reducing effective mortgage rates and increasing house prices. I show analytically the role of mortgage subsidies in determining house price changes, economic incidence, and efficiency costs using a theoretical framework for applied welfare analysis. I derive simple expressions for these effects, as functions of reduced-form sufficient statistics, which I use to measure the effects from eliminating mortgage deductions. My main results characterize the distributional impact of mortgage subsidies among buyers and owners and how house price ...
Finance and Economics Discussion Series , Paper 2016-081

Working Paper
Efficiency in Housing Markets: Do Home Buyers Know how to Discount?
Hjalmarsson, Randi; Hjalmarsson, Erik (2006)
We test for efficiency in the market for Swedish co-ops by examining the negative relationship between the sales price and the present value of future monthly payments or `rents'. If the co-op housing market is efficient, the present value of co-op rental payments due to underlying debt obligations of the cooperative should be fully reflected in the sales price. However, we find that, on average, a one hundred kronor increase in the present value of future rents only leads to an approximately 75 kronor reduction in the sales price; co-ops with higher rents are thus relatively overpriced ...
International Finance Discussion Papers , Paper 879

Working Paper
The Effect of Monetary Policy on Housing Tenure Choice as an Explanation for the Price Puzzle
Dias, Daniel A.; Duarte, Joao B. (2016-06)
In this paper we provide an alternative explanation for the price puzzle (Sims 1992) based on the effect of monetary policy on housing tenure choice and the weight of the shelter component in overall CPI. In the presence of nominal or financial frictions, when interest rates increase, the real cost of owning a house increases, and this increase may make some people prefer to rent instead of buying. This change in consumption behavior increases the price of rents relative to other goods. Starting in 1983, homeownership costs are based on a measure of implied owner equivalent rent, which is ...
International Finance Discussion Papers , Paper 1171

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