Leverage and House-price Dynamics Under the Recourse-Loan System in Japanese Prefecures

23 Pages Posted: 1 Dec 2010 Last revised: 9 Dec 2010

See all articles by Miki Seko

Miki Seko

Keio University - Faculty of Economics

Kensuke Konno

Mizuho Trust Systems

Kazuto Sumita

Kanazawa Seiryo University

Date Written: November 29, 2010

Abstract

We use Japanese prefectural-level data to analyze the relationship between borrowing patterns and house price dynamics under the recourse-loan system. Our principal finding is that in prefectures where highly leveraged homeowners are common– i.e. have high, extended loan-to-value ratios- house prices respond less to prefecture-specific shocks, such as changes in per-capita income. This finding based on the recourse-loan system is quite different from the finding under the non-recourse loan system, because under the recourse-loan system, the lock-in effect stemming from severe equity constraints is much more severe.

Keywords: house price dynamics, extended loan to value ratio. Panel data, recourse-loan system, Japan

JEL Classification: E31, E4, G21, R10, R21

Suggested Citation

Seko, Miki and Konno, Kensuke and Sumita, Kazuto, Leverage and House-price Dynamics Under the Recourse-Loan System in Japanese Prefecures (November 29, 2010). 46th Annual AREUEA Conference Paper. Available at SSRN: https://ssrn.com/abstract=1717056 or http://dx.doi.org/10.2139/ssrn.1717056

Miki Seko (Contact Author)

Keio University - Faculty of Economics ( email )

2-15-45 Mita, Ninato-ku
Tokyo 1088345
Japan

Kensuke Konno

Mizuho Trust Systems ( email )

Tokyo
Japan

Kazuto Sumita

Kanazawa Seiryo University ( email )

Ushi 10-1
Gosho-machi
Kanazawa, Ishikawa 9208620
Japan

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