Household Mortgage Refinancing Decisions are Neighbor Influenced

32 Pages Posted: 9 Dec 2016 Last revised: 6 Feb 2021

See all articles by W. Ben McCartney

W. Ben McCartney

Purdue University - Krannert School of Management

Avni Shah

University of Toronto at Scarborough - Division of Management; University of Toronto - Rotman School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: Feb 5, 2021

Abstract

Can social influence effects help explain regional heterogeneity in refinancing activity? Neighborhood social influence effects have been shown to affect publicly observable decisions, but their role in private decisions, like refinancing, remains unclear. Using precisely geolocated data and a nearest-neighbor research design, we find that households are 7\% more likely to refinance if a neighbor within 50 meters has recently refinanced. Consistent with a word-of-mouth mechanism, social influence effects are weaker when neighbors are farther away and non-existent for non-occupants. Our results illustrate the importance of the proximate community for household wealth accumulation and the transmission of monetary policy.

Keywords: Household Finance, Mortgages, Peer Effects, Neighbors

JEL Classification: D12, D14, D71, H31, R23

Suggested Citation

McCartney, W. Ben and Shah, Avni, Household Mortgage Refinancing Decisions are Neighbor Influenced (Feb 5, 2021). Available at SSRN: https://ssrn.com/abstract=2882317 or http://dx.doi.org/10.2139/ssrn.2882317

W. Ben McCartney (Contact Author)

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Avni Shah

University of Toronto at Scarborough - Division of Management ( email )

1265 Military Trial
Scarborough, Ontario M1C 1A4
Canada

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
243
Abstract Views
1,805
rank
141,419
PlumX Metrics