Download or read book How House Price Dynamics and Credit Constraints Affect the Equity Extraction of Senior Homeowners written by and published by . This book was released on 2015 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Seniors Home Equity Extraction written by Stephanie Moulton and published by . This book was released on 2019 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: Households borrow against home equity through different types of mortgages: closed end home equity loans or revolving lines of credit, cash-out refinancing, and--for senior homeowners--reverse mortgages. The objective of this study is to identify how borrowing constraints and the lending environment affect the rate of seniors' home equity borrowing and their choice of mortgage product. Ours is the first study to model the choice of reverse mortgages alongside other modes of equity borrowing. During the house price boom (2001-2007), we find that credit constrained areas display higher rates of home equity borrowing than less constrained areas as home equity levels increase for cash-out refinancing and reverse mortgages. During the recovery period (2010-2015), we observe this relationship only for reverse mortgage borrowing, consistent with tightened underwriting for forward mortgage loans.
Download or read book How Home Equity Extraction and Reverse Mortgages Affect the Credit Outcomes of Senior Households written by Stephanie Moulton and published by . This book was released on 2016 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper examines how the extraction of home equity, including but not limited to equity extracted through reverse mortgages, affects credit outcomes of senior households. We use data from the Federal Reserve Bank of New York/Equifax Consumer Credit Panel, supplemented with our unique credit panel dataset of reverse mortgage borrowers. We track credit outcomes for seniors who extracted equity through cash-out refinancing, home equity lines of credit or home equity loans between 2008 and 2011, and a random sample of nonextractors. We estimate differences-in-differences by extraction channel using individual, fixed-effects panel regression. We find that seniors extracting equity through reverse mortgages have greater reductions in consumer debt, and are less likely to become delinquent or foreclose three years post origination relative to other extractors and nonextractors. These effects are greater among households who experienced a credit shock within the two years prior to loan origination. To help isolate the effect of the extraction channel on credit outcomes, we re-estimate our models with a matched sample of consumers at the time of extraction. We find that otherwise similar HECM borrowers have larger reductions in credit card debt post-extraction than other equity borrowers and non-borrowers, with no significant difference in the rates of delinquency on non-housing debt post extraction. For HECM borrowers, we find that increased initial withdrawal and increased monthly cash flow contribute to the reduction in credit card debt.
Download or read book Housing Market Dynamics written by François Ortalo-Magné and published by . This book was released on 2001 with total page 60 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book The Housing Boom and Bust written by Thomas Sowell and published by Basic Books (AZ). This book was released on 2009-05-12 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt: Explains how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust. The "creative" financing of home mortgages and "creative" marketing of financial securities based on these mortgages to countries around the world, are part of the story of how a financial house of cards was built up--and then collapsed.
Download or read book Interest Rates and Equity Extraction During the Housing Boom written by Neil Bhutta and published by . This book was released on 2014 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Monetary policy is perhaps the most important tool the government has to quickly affect the trajectory of the economy. This paper estimates the impact of policy- driven short-term mortgage rates on home equity based borrowing. Using credit record panel data from 1999-2010, we show that the likelihood of equity extraction peaked in 2003 when mortgage rates hit historic lows, and estimate that a 100 basis point rate decline leads to a 25 percent rise in extraction. Exploiting geographic variation in house price fluctuations, we find this rate effect is half the magnitude of the house price effect. Additionally, differential responses by age and credit score provide new evidence of financial frictions. Finally, equity extraction increases default risk, most strikingly for those extracting in 2006 when both interest rates and house prices were peaking. Conditional on many factors including credit score, zip code house price changes and county fixed effects, those who extracted in 2006 were 90 percent more likely to become delinquent on a mortgage than non-extractors over the next four years.
Download or read book Financial Frictions in a Housing Economy written by Marcus Mølbak Ingholt and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: More than a decade has now passed since rapidly declining house prices triggered a global financial crisis that developed into a global recession, the speed and depth of which were unprecedented in recent history. The overarching objective of this Ph.D. thesis is to improve our understanding of how simple price adjustments in the housing market could cause havoc to the functioning of the global economy to such an extent. At first sight, it may not be obvious that housing markets matter greatly for aggregate economic activity. For instance, residential investments constitute a small share - 4.4 pct. in the United States (U.S.) and 5.4 pct. in Denmark - of the gross domestic product.1 However, real estate, in addition to providing housing services to families, serves as collateral on mortgage loans, home equity loans, and home equity lines of credit. A corollary of this servitude is that the supply of collateralized credit to homeowners expands and contracts roughly proportionally to the house price cycle. In consequence, house prices may act as impetuses that stimulate and depress economic activity (Kiyotaki and Moore, 1997; Iacoviello, 2005). This collateral channel - in conjunction with other mechanisms linking house prices, credit, and real activity - constitute the theoretical foundation of the thesis. The thesis consists of three self-contained chapters, in addition to this introduction. All chapters focus on the U.S. economy, but have implications that reach well beyond this scope.
Download or read book Home Equity Conversion Mortgages written by United States. Department of Housing and Urban Development and published by . This book was released on 1994 with total page 240 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Shifting credit standards and the boom and bust in US house prices written by John V. Duca and published by . This book was released on 2011 with total page 30 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Housing Price Dynamics and Household Mobility Decisions written by Tracey Nicole Seslen and published by . This book was released on 2003 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: The first chapter attempts to shed light on the role of housing price dynamics in mobility decisions, asking whether households respond to prices in a forward- or backward-looking manner, and the extent to which high leverage constrains moving behavior. On a broader level, the study tests whether price dynamics dominate non-market shocks as a force governing household mobility, given the importance of housing as an investment good and saving device. Using a 13 year sample from the Panel Study of Income Dynamics, I find that households are largely backward-looking in both their mobility and consumption decisions, and that non-market shocks play a significant role. Households show little or no response to equity constraints, and do not appear to time the market, despite significant forecastability in housing prices. These conclusions lend support to the notion of prices leading trading volume, but do not support the theoretical work of Stein (1995), which attributes mobility behavior to changes in equity constraints brought about by changes in housing prices. The second chapter uses data from the Retirement History Survey to measure the impact of property tax abatement programs on elderly homeownership decisions. Analysis using a competing risks framework, in which the decision to trade down is treated separately from the decision to end homeownership completely, shows striking differences in the impact of property taxes on each type of failure: for the elderly who choose to trade down, property taxes have a positive effect on the hazard of moving. Alternatively, property taxes have little impact on the tenure decision. Incorporating individual heterogeneity to correct for sample bias, to capture mover-stayer effects, and to account for correlation between property taxes and omitted variables, has little effect on the results. From an "ex post" perspective, the results of the analysis lead to the conclusion that property tax abatement programs have a small impact at best, and may be leading to undesirable redistributional outcomes. The final chapter employs data from the neighborhood clusters sample of the 1989 American Housing Survey and the wealth supplement of the 1989 Panel Study of Income Dynamics to study to distribution of wealth within US residential neighborhoods. Calculations using the Bourguignon decomposable inequality index show that wealth is more unequally distributed than income, and income more than housing wealth, at all levels of aggregation--neighborhoods, metropolitan areas, census regions, and the entire US.
Download or read book A Quantitative Analysis of the US Housing and Mortgage Markets and the Foreclosure Crisis written by Satyajit Chatterjee and published by . This book was released on 2015 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: The authors construct a quantitative equilibrium model of the housing sector that accounts for the homeownership rate, the average foreclosure rate, and the distribution of home-equity ratios across homeowners prior to the recent boom and bust in the housing market. They analyze the key mechanisms that account for these facts, including the preferential tax treatment of housing and inflation. The authors then use the model to gain a deeper understanding of the recent housing and mortgage crisis by studying the consequence of an unanticipated increase in the supply of housing (overbuilding shock). They show that the model can account for the observed decline in house prices and much of the increase in the foreclosure rate if two additional forces are taken into account: (i) the lengthening of the time to complete a foreclosure (during which a defaulter can stay rent-free in his house) and (ii) the tightening of credit constraints in the market for new mortgages.
Download or read book House prices home equity based borrowing and the U S household leverage crisis written by Atif Mian and published by . This book was released on 2009 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using individual-level data on homeowner debt and defaults from 1997 to 2008, we show that borrowing against the increase in home equity by existing homeowners is responsible for a significant fraction of both the sharp rise in U.S. household leverage from 2002 to 2006 and the increase in defaults from 2006 to 2008. Employing land topology-based housing supply elasticity as an instrument for house price growth, we estimate that the average homeowner extracts 25 to 30 cents for every dollar increase in home equity. Money extracted from increased home equity is not used to purchase new real estate or pay down high credit card balances, which suggests that borrowed funds may be used for real outlays (i.e., consumption or home improvement). Home equity-based borrowing is stronger for younger households, households with low credit scores, and households with high initial credit card utilization rates. Homeowners in high house price appreciation areas experience a relative decline in default rates from 2002 to 2006 as they borrow heavily against their home equity, but experience very high default rates from 2006 to 2008. Our estimates suggest that home equity-based borrowing is equal to 2.8% of GDP every year from 2002 to 2006, and accounts for at least 34% of new defaults from 2006 to 2008.
Download or read book Housing and the Financial Crisis written by Edward L. Glaeser and published by University of Chicago Press. This book was released on 2013-08-19 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Conventional wisdom held that housing prices couldn’t fall. But the spectacular boom and bust of the housing market during the first decade of the twenty-first century and millions of foreclosed homeowners have made it clear that housing is no different from any other asset in its ability to climb and crash. Housing and the Financial Crisis looks at what happened to prices and construction both during and after the housing boom in different parts of the American housing market, accounting for why certain areas experienced less volatility than others. It then examines the causes of the boom and bust, including the availability of credit, the perceived risk reduction due to the securitization of mortgages, and the increase in lending from foreign sources. Finally, it examines a range of policies that might address some of the sources of recent instability.
Download or read book Interest Rates and Equity Extraction During the Housing Boom written by Neil Bhutta and published by . This book was released on 2017 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using credit record panel data from 1999-2010, we show that the likelihood of home equity extraction (borrowing, on average, about $40,000 against one's home) peaked in 2003 when mortgage rates hit historic lows, and estimate that a 100 basis point rate decline is associated with a 25 percent rise in the likelihood of extraction. Further, this relationship is amplified in ZIP codes with substantial house price growth. Differential responses to interest rates and home price appreciation by age and credit score provide new evidence of financial frictions. Finally, equity extraction is associated with higher default risk, especially for extractors in 2006 who were more than twice as likely to become delinquent on a mortgage than non-extractors over the next four years.
Download or read book The Economics of Aging written by David A. Wise and published by University of Chicago Press. This book was released on 2009-05-15 with total page 428 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Economics of Aging presents results from an ongoing National Bureau of Economic Research project. Contributors consider the housing mobility and living arrangements of the elderly, their labor force participation and retirement, the economics of their health care, and their financial status. The goal of the research is to further our understanding both of the factors that determine the well-being of the elderly and of the consequences that follow from an increasingly older population with longer individual life spans. Each paper is accompanied by critical commentary.
Download or read book Modelling Spatial Housing Markets written by Geoffrey Meen and published by Springer Science & Business Media. This book was released on 2012-12-06 with total page 279 pages. Available in PDF, EPUB and Kindle. Book excerpt: Spatial fixity is one of the characteristics that distinguishes housing from most other goods and services in the economy. In general, housing cannot be moved from one part of the country to another in response to shortages or excesses in particular areas. The modelling of housing markets and the interlinkages between markets at different spatial levels - international, national, regional and urban - are the main themes of this book. A second major theme is disaggregation, not only in terms of space, but also between households. The book argues that aggregate time-series models of housing markets of the type widely used in Britain and also in other countries in the past have become less relevant in a world of increasing income dispersion. Typically, aggregate relationships will break down, except under special conditions. We can no longer assume that traditional location or tenure patterns, for example, will continue in the future. The book has four main components. First, it discusses trends in housing markets both internationally and within nations. Second, the book develops theoretical housing models at each spatial scale, starting with national models, moving down to the regional level and, then, to urban models. Third, the book provides empirical estimates of the models and, finally, the models are used for policy analysis. Analysis ranges over a wide variety of topics, including explanations for differing international house price trends, the causes of housing cycles, the role of credit markets, regional housing market interactions and the role of housing in urban/suburban population drift.
Download or read book Staff Guidance Note on Macroprudential Policy written by International Monetary Fund and published by International Monetary Fund. This book was released on 2014-06-11 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: This note provides guidance to facilitate the staff’s advice on macroprudential policy in Fund surveillance. It elaborates on the principles set out in the “Key Aspects of Macroprudential Policy,” taking into account the work of international standard setters as well as the evolving country experience with macroprudential policy. The main note is accompanied by supplements offering Detailed Guidance on Instruments and Considerations for Low Income Countries
