Posts Tagged ‘housing


Paper: US mercado de viviendas, integración y contagio

Integration and Contagion in US Housing Markets


This paper explores integration and contagion among US metropolitan housing markets. The analysis applies Federal Housing Finance Agency (FHFA) house price repeat sales indexes from 384 metropolitan areas to estimate a multi-factor model of U.S. housing market integration. It then identifies statistical jumps in metropolitan house price returns as well as MSA contemporaneous and lagged jump correlations. Finally, the paper evaluates contagion in housing markets via parametric assessment of MSA house price spatial dynamics.

A R-squared measure reveals an upward trend in MSA housing market integration over the 2000s to approximately .83 in 2010. Among California MSAs, the trend was especially pronounced, as average integration increased from about .55 in 1997 to close to .95 in 2008! The 2000s bubble period similarly was characterized by elevated incidence of statistical jumps in housing returns. Again, jump incidence and MSA jump correlations were especially high in California. Analysis of contagion among California markets indicates that house price returns in San Francisco often led those of surrounding communities; in contrast, southern California MSA house price returns appeared to move largely in lock step.

The high levels of housing market integration evidenced in the analysis suggest limited investor opportunity to diversify away MSA-specific housing risk. Further, results suggest that macro and policy shocks propagate through a large number of MSA housing markets. Research findings are relevant to all market participants, including institutional investors in MBS as well as those who regulate housing, the housing GSEs, mortgage lenders, and related financial institutions.

Link al Paper.


Paper: Hipotecas (x3)

Strategic Default on First and Second Lien Mortgages  During the Financial Crisis


Strategic default behavior suggests that the default process is not only a matter of inability to pay.   Economic costs and benefits affect the incidence and timing of defaults.  As with prior research, we find that people default strategically as their home value falls below the mortgage value (exercise the put option to default on their first mortgage).   While some of these homeowners default on both first mortgages and second lien home equity lines, a large portion of the delinquent borrowers have kept their second lien current during the recent financial crisis.  These second liens, which are current but stand behind a seriously delinquent first mortgage, are subject to a high risk of default.   On the other hand, relatively few borrowers default on their second liens while remaining current on their first.  This paper explores the strategic factors that may affect borrower decisions to default on first vs. second lien mortgages.  We find that borrowers are more likely to remain current on their second lien if it is a home equity line of credit (HELOC) as compared to a closed-end home equity loan.  Moreover, the size of the unused line of credit is an important factor.  Interestingly, we find evidence that the various mortgage loss mitigation programs also play a role in providing incentives for homeowners to default on their first mortgages.

Link al Paper


Location Efficiency and Mortgage Default


Using a sample of over 40,000 mortgages in Chicago, Jacksonville, andSan Francisco, we model the probability of mortgage default based on differences in location efficiency. We used two proxy variables for location efficiency: 1) vehicles per household scaled by income and 2)Walk Score. We find that default probability increases with the number of vehicles owned after controlling for income. Further, we find that default probability decreases with higher Walk Scores in high income areas but increases with higher Walk Scores in low income areas. These results suggest that some degree of greater mortgage underwriting flexibility could be provided to assist households with the purchase of location efficient homes, without increasing mortgage default. They also support the notion that government policies around land use, zoning,infrastructure, and transportation could have significant impacts on mortgage default rates.

Link al Paper


Mortgage Choices and Housing Speculation


We describe a rational expectations model in which speculative bubbles in house prices can emerge. Within this model both speculators and their lenders use interest-only mortgages (IOs) rather than traditional mortgages when there is a bubble. Absent a bubble, there is no tendency for IOs to be used. These insights are used to assess the extent to which house prices in US cities were driven by speculative bubbles over the period 2000-2008. We find that IOs were used sparingly in cities where elastic housing supply precludes speculation from arising. In cities with inelastic supply, where speculation is possible, there was heavy use of IOs, but only in cities that had boom-bust cycles. Peak IO usage predicts rapid appreciations that cannot be explained by standard correlates and this variable is more robustly correlated with rapid appreciations than other mortgage characteristics, including sub-prime, securitization and leverage.Where IOs were popular, their use does not appear to have been a response to houses becoming more expensive. Indeed, their use anticipated future appreciation. Finally,consistent with the reason why lenders prefer IOs, these mortgages are more likely to berepaid earlier or foreclose. Combined with our model, this evidence suggests that speculative bubbles were an important factor driving prices in cities with boom-bust cycles.

Link al Paper



Una Galería de Gráficos

Es lo que tiene el excelente blog Calculated Risk. Tratan solo sobre la Economía de Estados Unidos, pero aún así hay variedad para todos los gustos. Vale la pena una recorrida, para un poco de perspectiva.


Paper: Analizando la burbuja inmobiliaria norteamericana

Reasonable People Did Disagree: Optimism and PessimismAbout the U.S. Housing Market Before the Crash

Understanding the evolution of real-time beliefs about house price appreciation is central to understanding the U.S. housing crisis. At the peak of the recent housing cycle, both borrowers and lenders appealed to optimistic house price forecasts to justify undertaking increasingly risky loans. Manymobservers have argued that these rosy forecasts ignored basic theoretical and empirical evidence that pointed to a massive overvaluation of housing and thus to an inevitable and severe price decline. We revisit the boom years and show that the economics profession provided little such countervailing evidence at the time. Many economists, skeptical that a bubble existed, attempted to justify the historic run-up in housing prices based on housing fundamentals. Other economists were more uncertain, pointing to some evidence of bubble-like behavior in certain regional housing markets. Even these more skeptical economists, however, refused to take a conclusive position on whether a bubble existed. The small number of economists who argued forcefully for a bubble often did so years before the housing market peak, and thus lost a fair amount of credibility, or they make arguments fundamentally at odds with the data even ex post. For example, some economists suggested that cities where new construction was limited by zoning regulations or geography were particularly “bubble-prone,” yet the data shows that the cities with the biggest gyrations in house prices were often those at the epicenter of the new construction boom. We conclude by arguing that economic theory provides little guidance as to what should be the “correct” level of asset prices —including housing prices. Thus, while optimistic forecasts held by many market participants in 2005 turned out to be inaccurate, they were not ex ante unreasonable.

Link al Paper

Paper: ¿Dueño o inquilino?

The Homeownership Gap

Recent years have seen a sharp rise in the number of negative equityhomeowners—those who owe more on their mortgages than theirhouses are worth. These homeowners are included in the offi cialhomeownership rate computed by the Census Bureau, but the savingsthey must amass to retain their home or purchase a new home aredaunting. Recognizing that these homeowners are likely to convertto renters over time, the authors of this analysis calculate an“effective” rate of homeownership that excludes negative equityhouseholds. They argue that the effective rate—5.6 percentagepoints below the offi cial rate—may be a useful guide to the futurepath of the offi cial rate.

Link al Paper

Fun & Finance


Fun & Finance Rollover

"It is hard to be finite upon an infinite subject, and all subjects are infinite." Herman Melville

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