Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls

58 Pages Posted: 1 Dec 2015 Last revised: 24 Mar 2018

Date Written: March 1, 2017

Abstract

I empirically analyze how changes in access to housing collateral affect homeowner borrowing behavior. To isolate the role of collateral constraints from that of wealth effects, I exploit the fully anticipated expiration of resale price controls on owner-occupied housing in Montgomery County, Maryland. I estimate a marginal propensity to borrow out of housing collateral that ranges between $0.04-$0.13 and is correlated with homeowners’ initial leverage. Additional analysis of residential investment and ex-post loan performance indicates that some of the extracted funds generated new expenditures. These results suggest a potentially important role for collateral constraints in driving household expenditures.

Keywords: Housing Collateral, Household Debt, Housing Wealth Effect

JEL Classification: D14, E21, G21, R20, R30, R52

Suggested Citation

DeFusco, Anthony, Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls (March 1, 2017). Available at SSRN: https://ssrn.com/abstract=2696677 or http://dx.doi.org/10.2139/ssrn.2696677

Anthony DeFusco (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

HOME PAGE: http://www.anthonydefusco.com

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