- U.S. Census Bureau/U.S. Department of Housing and Urban Development Joint Release – New Residential Construction January 2015
- Federal Reserve Bank of New York Staff Report, Credit Supply and the Housing Boom – provides a novel perspective on the possible origins of the Great Recession.
- Freddie Mac – Fourth Quarter 2014 Financial Results
- Freddie Mac – Refinance Report Concludes that Borrowers who Refinanced in 2014 will Save Approximately 5 Billion in Interest Payments
Tag Archives: housing boom
Wednesday’s Academic Roundup
- Regional House Price Segmentation and Convergence in the US: A New Approach by William Miles, Journal of Real Estate Finance and Economics, Vol. 50, No. 1, 2015.
- Impacts of Planning Rules, Regulations, Uncertainty and Delay on Residential Property Development by Arthur Grimes & Ian Mitchell, Motu Working Paper No. 15-20.
- Credit Supply and the Housing Boom by Alejandro Justiniano, Giorgio E. Primiceri, & Andrea Tamalotti, NBER Working Paper No. w20874.
- Rethinking the Tax-Revenue Effect of REIT Taxation by Bradley T. Borden, Florida Tax Review, Vol. 17, Issue 6, 2015, Forthcoming; Brooklyn Law Review, Legal Studies Paper No. 400.
- The Politics and Economics of Metropolitan Sprawl by William A. Fischel, Zoning Rules! The Economics of Land Use Regulation. Cambridge, Mass.: Lincoln Institute of Land Policy, 2015, Forthcoming.
- Property Law Conflicts by Joseph William Singer, 54 Washburn Law Journal 139 (2014) (discussing what law applies to real property case conflicts).
Leverage and the Foreclosure Crisis
Dean Corbae and Erwan Quintin have posted Leverage and the Foreclosure Crisis to SSRN (behind a paywall; available here for free). They ask how “much of the recent rise in foreclosures can be explained by the large number of high-leverage mortgage contracts originated during the housing boom?” (1) Their model and counterfactual experiments suggest that “the increased availability of high-leverage loans prior to the crisis can explain between 40% and 65% of the initial rise in foreclosure rates.” (1)
In their introduction, they note that
The increased availability of loans with low downpayments made it possible for more households to obtain the financing necessary to purchase a house. At the same time however,because these contracts are characterized by little equity early in the life of the loan, they are prone to default when home prices fall. Not surprisingly then, mortgages issued during the recent housing boom with high leverage have defaulted at much higher frequency than other loans since home prices began their collapse in late 2006. (2, citations omitted)
Their finding are, as they note, not so surprising, although it is interesting to see them try to quantify the effect of low-downpayment mortgages.
More importantly, their paper will help inform the ongoing debate as to whether federal regulators should impose strict down-payment underwriting requirements upon lenders or whether they should allow lenders to develop more dynamic underwriting models for which downpayment requirements are just one factor.