November 16, 2016
- This paper, How do Household’s Make Mortgage Choices?, reviews recent literature on how households make decisions regarding residential mortgages. It focuses on recent publications in Real Estate Economics that are related to households’ mortgage choices. The paper covers four areas: (1) the role of intermediaries such as mortgage brokers; (2) how households choose between a fixed and an adjustable rate mortgage; (3) how homeowners choose between other features of mortgage contracts; and (4) reverse mortgages.
- This paper, A New Index on Housing Sentiment, proposes a new measure for housing sentiment and show that it accurately tracks expectations about future house price growth rates. It constructs the housing sentiment index using partial least squares on household survey responses to questions about buying conditions for houses. It finds that housing sentiment explains a large share of the time-variation in house prices during both boom and bust cycles and it strongly outperforms several macroeconomic variables typically used to forecast house prices.