American Housing Price in the 2000s

Abstract

In this paper, we want to capture the dynamics of housing price evolution since year 2000 from the interaction of credit borrowers and lenders. Though securitization, the banks and other financial intermediates were being able to supply more credit to potential home buyers. In an infinite time horizon model, we build the rationale of the financial intermediate’s decision of making loans and liquidation as well as borrowers’ decision of voluntary default. We employ Bellman equation to describe economic agents’ calculation of expected payoffs. We finally produce simulations of housing supply and demand, housing price and mortgage rate over time.

Keywords: American housing market, housing price, securitization, simulation