House Prices and Household Credit Access Evidence from Prosper.Com

32 Pages Posted: 2 Feb 2009

See all articles by Rodney Ramcharan

Rodney Ramcharan

University of Southern California, Marshall School of Business

Date Written: February 2, 2009

Abstract

How do fluctuations in the value of home prices affect the borrowing conditions that households face outside the mortgage market? This paper turns to over 220,000 loan applications on Prosper.com - an internet based peer to peer bank - to analyze this question. We find that home owners in states with declining home prices face significantly higher interest rates. Declining home prices also limit their ability to access credit, and accelerate the pace of loan delinquencies in this market. These results are especially large for borrowers with sub prime credit ratings, and are driven in part by an increased demand for non-collateralized lending among this group. Thus, fluctuations in home prices appear to have a substantial impact on credit availability and consumer finance well beyond the mortgage market.

Keywords: House prices, Counsumer finance

JEL Classification: G21, D12

Suggested Citation

Ramcharan, Rodney, House Prices and Household Credit Access Evidence from Prosper.Com (February 2, 2009). Available at SSRN: https://ssrn.com/abstract=1336579 or http://dx.doi.org/10.2139/ssrn.1336579

Rodney Ramcharan (Contact Author)

University of Southern California, Marshall School of Business ( email )

2250 Alcazar Street
Los Angeles, CA 90089
United States

HOME PAGE: http://https://sites.google.com/site/rodneyramcharan/

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