New Construction and the Mortgage Crisis
42 Pages Posted: 28 Sep 2017
Date Written: September 26, 2017
This paper argues that the combination of sharp value depreciation for newly constructed homes and the remarkable increase in residential construction during the first half of the 2000s can explain the geographic concentration of mortgage defaults during the Great Recession. We provide empirical evidence that loans for new home purchases have higher delinquency rates than loans used to purchase existing homes. We also offer some insights to explain why this performance differential exists. Our findings contribute to the emerging literature that identifies the causes of the mortgage crisis beyond the expansion of subprime lending.
Keywords: Mortgage Crisis, New Houses, Collateral Value, Housing Supply Shock
JEL Classification: G01, G21, R14, R52
Suggested Citation: Suggested Citation