House Prices and Credit Constraints: Making Sense of the US Experience

John Muellbauer, Anthony Murphy and John Duca

No 8360, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: Most US house price models break down in the mid-2000's, due to the omission of exogenous changes in mortgage credit supply (associated with the sub-prime mortgage boom) from house price-to-rent ratio and inverted housing demand models. Previous models lack data on credit constraints facing first-time home-buyers. Incorporating a measure of credit conditions--the cyclically adjusted loan-to-value ratio for first time buyers--into house price to rent ratio models yields stable long-run relationships, more precisely estimated effects, reasonable speeds of adjustment and improved model fits.

Keywords: House prices; Credit standards; Subprime mortgages; House price to rent ratio (search for similar items in EconPapers)
JEL-codes: C51 C52 E51 G21 R31 (search for similar items in EconPapers)
Date: 2011-04
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Citations: View citations in EconPapers (193)

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Related works:
Journal Article: House Prices and Credit Constraints: Making Sense of the US Experience (2011)
Working Paper: House Prices and Credit Constraints: Making Sense of the U.S. Experience (2011)
Working Paper: House prices and credit constraints: making sense of the U.S. experience (2011)
Working Paper: House prices and credit constraints: making sense of the U.S. experience (2011)
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