TY - JOUR
T1 - Drivers of the great housing boom-bust
T2 - Credit conditions, beliefs, or both?
AU - Cox, Josue
AU - Ludvigson, Sydney C.
N1 - Funding Information:
We acknowledge financial support from the C.V. Starr Center for Applied Economics at NYU. We are grateful to participants at the ?Housing, Credit, and Heterogeneity? conference, Stockholm, September 13?14, 2018, for helpful comments, and to Cindy Soo both for helpful comments and for providing us the data on her national housing media index.
Publisher Copyright:
© 2019 American Real Estate and Urban Economics Association
PY - 2021/9/1
Y1 - 2021/9/1
N2 - Two potential driving forces of house price fluctuations are commonly cited: credit conditions and beliefs. We posit some simple empirical calculations using direct measures of credit conditions and beliefs to consider their potentially distinct roles in house price fluctuations at the aggregate level. Changes in credit conditions are positively related to the fraction of riskier nonconforming debt in total mortgage lending, while measures of beliefs are unrelated to this ratio. Credit conditions explain quantitatively large magnitudes of the variation in quarterly house price growth and also predict future house price growth. Beliefs bear some relation to contemporaneous house price growth but have little predictive power. A structural vector autoregression analysis implies that exogenous changes in credit conditions have quantitatively important dynamic causal effects on house price changes.
AB - Two potential driving forces of house price fluctuations are commonly cited: credit conditions and beliefs. We posit some simple empirical calculations using direct measures of credit conditions and beliefs to consider their potentially distinct roles in house price fluctuations at the aggregate level. Changes in credit conditions are positively related to the fraction of riskier nonconforming debt in total mortgage lending, while measures of beliefs are unrelated to this ratio. Credit conditions explain quantitatively large magnitudes of the variation in quarterly house price growth and also predict future house price growth. Beliefs bear some relation to contemporaneous house price growth but have little predictive power. A structural vector autoregression analysis implies that exogenous changes in credit conditions have quantitatively important dynamic causal effects on house price changes.
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U2 - 10.1111/1540-6229.12303
DO - 10.1111/1540-6229.12303
M3 - Article
AN - SCOPUS:85075213862
VL - 49
SP - 843
EP - 875
JO - Real Estate Economics
JF - Real Estate Economics
SN - 1080-8620
IS - 3
ER -