Author : Manuel Adelino
Publisher :
ISBN 13 :
Total Pages : 50 pages
Book Rating : 4.:/5 (778 download)
Book Synopsis Credit supply and house prices : evidence from mortgage market segmentation by : Manuel Adelino
Download or read book Credit supply and house prices : evidence from mortgage market segmentation written by Manuel Adelino and published by . This book was released on 2012 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: We show that easier access to credit significantly increases house prices by using exogenous changes in the conforming loan limit as an instrument for lower cost of financing and higher supply. Houses that become eligible for financing with a conforming loan show an increase in house values of 1.1 dollars per square foot (for an average price per square foot of 224 dollars) and higher overall house prices controlling for a rich set of house characteristics. These coefficients are consistent with a local elasticity of house prices to interest rates below 10. In addition, loan to value ratios around the conforming loan limit deviate significantly from the common 80 percent norm, which confirms that it is an important factor in the financing choices of home buyers. In line with our interpretation, the results are stronger in the first half of our sample (1998-2001) when the conforming loan limit was more important, given that other forms of financing were less common and substantially more expensive.