Credit Supply and Housing Speculation

66 Pages Posted: 27 Jul 2018 Last revised: 3 Apr 2019

See all articles by Atif R. Mian

Atif R. Mian

Princeton University - Department of Economics; Princeton University - Woodrow Wilson School of Public and International Affairs; NBER

Amir Sufi

University of Chicago - Booth School of Business; NBER

Multiple version iconThere are 2 versions of this paper

Date Written: March 26, 2019

Abstract

Speculation is a critical channel through which credit supply expansion affects the housing cycle. The surge in private label mortgage securitization in 2003 fueled a large expansion in mortgage credit supply by lenders financed with non-core deposits. Areas more exposed to these lenders experienced a large relative rise in transaction volume driven by a small group of speculators, and these areas simultaneously witnessed an amplified housing boom and bust. Consistent with the importance of belief heterogeneity, house price growth expectations of marginal buyers rose during the boom, while housing market pessimism among the general population increased.

Keywords: speculation, house prices, bubbles, subprime, credit supply, mortgage default crisis, kindleberger, minsky

JEL Classification: G01, G12, G02

Suggested Citation

Mian, Atif R. and Sufi, Amir, Credit Supply and Housing Speculation (March 26, 2019). Available at SSRN: https://ssrn.com/abstract=3209564 or http://dx.doi.org/10.2139/ssrn.3209564

Atif R. Mian

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

Princeton University - Woodrow Wilson School of Public and International Affairs ( email )

Princeton University
Princeton, NJ 08544-1021
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Amir Sufi (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

NBER

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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