The Subprime Crisis and House Price Appreciation
47 Pages Posted: 15 Sep 2009 Last revised: 27 May 2023
There are 3 versions of this paper
The Subprime Crisis and House Price Appreciation
The Subprime Crisis and House Price Appreciation
The Subprime Crisis and House Price Appreciation
Date Written: September 2009
Abstract
This paper argues that econometric analysis of housing price indexes before 2006 generated forecasts of future long-term price growth and low estimated probabilities of extreme price decreases. These forecasts of future increases in home-loan collateral values may have affected both the demand and the supply of mortgages. Standard time series models using repeat-sales indices suggested that positive trends had a long half-life. Expectations based on such models supported expectations that could lead to an asset bubble. Analysis of data from the HMDA loan data base and LoanPerformance.com at the MSA level and at the loan level substantiates both supply and demand effects of past price trends in housing markets, particularly with respect to subprime mortgage applications and approvals. At the MSA level, past home price increases are associated with higher subprime applications and loan to value ratios. Approval probability of subprime loans was not affected by higher loan to value ratios. At the loan level, the approval probability of subprime applications is also positively associated with past home price appreciation. These results differ for prime mortgages.
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Did Securitization Lead to Lax Screening? Evidence from Subprime Loans
By Benjamin J. Keys, Tanmoy K. Mukherjee, ...
-
The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis
By Atif R. Mian and Amir Sufi
-
The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis
By Atif R. Mian and Amir Sufi
-
Understanding the Subprime Mortgage Crisis
By Yuliya Demyanyk and Otto Van Hemert
-
Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions
-
Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions
-
Understanding the Securitization of Subprime Mortgage Credit
By Adam B. Ashcraft and Til Schuermann
-
Housing Supply and Housing Bubbles
By Edward L. Glaeser, Joseph Gyourko, ...
-
Housing Supply and Housing Bubbles
By Edward L. Glaeser, Joseph Gyourko, ...
-
Urban Growth and Housing Supply
By Edward L. Glaeser, Joseph Gyourko, ...