American Economic Journal:
Economic Policy
ISSN 1945-7731 (Print) | ISSN 1945-774X (Online)
The Sensitivity of Housing Demand to Financing Conditions: Evidence from a Survey
American Economic Journal: Economic Policy
vol. 13,
no. 1, February 2021
(pp. 231–65)
Abstract
Measuring the sensitivity of housing demand to mortgage rates and available leverage is challenging because there is generally no exogenous variation in these variables. This paper circumvents this issue by designing a strategic survey in which respondents report their willingness to pay (WTP) for a home under different financing scenarios. Relaxation of down payment constraints or an exogenous increase in nonhousing wealth has large effects on WTP, especially for poorer and more credit-constrained households. However, changing the mortgage rate has only moderate effects on WTP. These findings have implications for theoretical models of house price determination and for policy.Citation
Fuster, Andreas, and Basit Zafar. 2021. "The Sensitivity of Housing Demand to Financing Conditions: Evidence from a Survey." American Economic Journal: Economic Policy 13 (1): 231–65. DOI: 10.1257/pol.20150337Additional Materials
JEL Classification
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- R21 Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
- R38 Production Analysis and Firm Location: Government Policy