The Ins and Outs of Mortgage Debt During the Housing Boom and Bust

51 Pages Posted: 22 Nov 2014

See all articles by Neil Bhutta

Neil Bhutta

Board of Governors of the Federal Reserve System

Date Written: July 31, 2014

Abstract

From 1999 to 2013, U.S. mortgage debt doubled and then contracted sharply. Our understanding of the factors driving this volatility in the stock of debt is hampered by a lack of data on mortgage flows. Using comprehensive, individual-level panel data on consumer liabilities, I estimate detailed mortgage inflows and outflows. During the boom, inflows from real estate investors tripled, far outpacing growth from other segments such as first-time homebuyers. During the bust, although defaults and deleveraging are popular explanations for the debt decline, a collapse in inflows has been the major driver. Inflow declines across counties have been associated not just with house price declines, but also with rising unemployment and higher minority population shares. Finally, inflow declines reflect, in part, a dramatic decline in first-time homebuying. First-time homebuying fell among both high and low credit score individuals, but much more precipitously for low score indivi duals. Further analysis suggests that the differential decline by credit score likely reflects markedly tightened credit supply.

Keywords: Mortgage debt, mortgage default, first-time homebuyer, credit supply

JEL Classification: E5, G21

Suggested Citation

Bhutta, Neil, The Ins and Outs of Mortgage Debt During the Housing Boom and Bust (July 31, 2014). FEDS Working Paper No. 2014-91. Available at SSRN: https://ssrn.com/abstract=2529175 or http://dx.doi.org/10.2139/ssrn.2529175

Neil Bhutta (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

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