Sunday, Jan. 6, 2019 8:00 AM - 10:00 AM
- Chair: Kristopher Gerardi, Federal Reserve Bank of Atlanta
The Effect of Government Mortgage Guarantees on Homeownership
AbstractThe U.S. government guarantees a majority of residential mortgages, which is often justified as a means to promote homeownership. In this paper we use detailed property-level data to estimate the effect of government mortgage guarantees on homeownership by exploiting changes in the conforming loan limits (CLLs). We find that CLL changes have a substantial effect on government guarantees, but find no robust effect on homeownership. This suggests that government guarantees could be considerably reduced with modest effects on the homeownership rate. Our finding is particularly relevant for housing finance reform plans that propose to gradually reduce the government’s involvement in the mortgage market by reducing the CLLs.
Buying Up Elm Street: Institutional Investors and the Housing Recovery
AbstractTen years after the mortgage crisis, the U.S. residential housing market rebounded significantly with house prices now near the peak achieved during the boom. Home ownership rates, on other hand, remained depressed despite low vacancy rates. We reconcile the two phenomena by documenting the rising presence of institutional investors in this market. We argue that a contraction of mortgage supply after the Great Recession has led to cash-rich institutions, some affiliated with large financial or real estate firms, crowding out individual home buyers, and, thus, has resulted in higher house price growth rates but lower home ownership rates. Our analysis is conducted using unique housing transaction data. Our empirical strategy exploits heterogeneity in zip code's exposure to regulatory changes enacted immediately after the crisis. We find that a one percentage point increase in the share of housing purchases by institutional investors between 2007 and 2014 was associated with an increase of 9 basis points or 2.5 percent in real house price growth rate in the local market. By contrast, a one percentage point rise in the share of housing sales by institutional investors lowered the real house price growth rate by 17 basis points or 4.8 percent. Our findings are particularly prominent in the distressed market and in areas with high elasticity in housing supply.
Mortgage Finance Development Across the World
AbstractDespite its relevance for economic growth and development, the level of mortgage market development varies widely across countries. Using panel data for the 2006 2013 period, we examine the institutional determinants of mortgage development across 116 countries, The study shows that the coverage of information institutions widens and legal institutions strengthen with increasing economic growth and development. However, the information and legal characteristics of countries as proxied by the efficiency of mortgage foreclosure, quality creditor legal property rights and efficiency of credit information sharing via public credit registers matter more for mortgage development in low-income countries than in middle and high-income countries. Our findings suggest that these formal institutions might be effective and develop as countries grow. We therefore identify a possible pecking order in creditor protection mechanisms, running from credit information sharing through to private credit bureaus, public credit registers and then legal rights protections achieved through mortgage legal rules and foreclosure enforcement. Particularly, ex-post mechanisms through legal institutions provide a more effective protection for creditors than ex-ante mechanism such as information in low-income countries due to the limited scope of credit information systems.
- R1 - General Regional Economics
- R3 - Real Estate Markets, Spatial Production Analysis, and Firm Location