Leverage and House-Price Dynamics in U.S. Cities

Lamont, Owen A.; Stein, Jeremy C.

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Leverage and House-Price Dynamics in U.S. Cities

NBER Working Paper No. w5961

40 Pages Posted: 26 Jul 2000 Last revised: 17 Apr 2022

See all articles by Owen A. Lamont

Owen A. Lamont

Harvard University - Department of Economics

Jeremy C. Stein

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

There are 3 versions of this paper

Date Written: March 1997

Abstract

In this paper, we use city-level data to analyze the relationship between homeowner borrowing patterns and house-price dynamics. Our principal finding is that in cities where homeowners are more leveraged--i.e., have higher loan-to-value ratios--house prices react more sensitively to city-specific shocks, such as changes in per-capita income. This finding is consistent with recent theories which emphasize the role of collateralized borrowing in shaping the behavior of asset prices.

Suggested Citation: Suggested Citation

Lamont, Owen A. and Stein, Jeremy C., Leverage and House-Price Dynamics in U.S. Cities (March 1997). NBER Working Paper No. w5961, Available at SSRN: https://ssrn.com/abstract=225741