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Working Paper
Your house or your credit card, which would you choose?: personal delinquency tradeoffs and precautionary liquidity motives
This paper finds strong evidence that many individuals choose to pay credit card bills even at the cost of mortgage delinquencies and foreclosures. While the popular press and some recent literature have suggested that this choice may emerge from steep declines in housing prices, we find evidence that individual-level liquidity concerns are at least as important in the decision. That is, choosing credit cards over housing suggests a precautionary liquidity preference. ; By linking the mortgage delinquency decisions to individual-level credit conditions, we are able to assess the compound ...