 Subprime credit, idiosyncratic risk, and foreclosuresProdosh Simlai The Quarterly Review of Economics and Finance, 2019, vol. 74, issue C, 175-189 Abstract: In this paper, we look at the determinants of foreclosure rates with particular attention to measures such as household leverage, which is related to subprime credit population, and idiosyncratic risk, which utilizes a spatial delineation of housing submarkets. We use county-level data from the state of California and provide a number of important findings regarding the determinants of foreclosures across housing submarkets. We find a significant negative relationship between foreclosures and both housing price growth and idiosyncratic risk, and a positive relationship between foreclosures and household leverage. These relationships persist even after we control for state variables such as tech pulse, mortgage rate spread, median household income, and unemployment rate. We show a breakdown of the cross-sectional variability of foreclosure rates by allowing a two-way sorting of the counties using housing price growth and idiosyncratic risk. The idiosyncratic risk measure reemphasizes the translation of leverage-induced shocks into foreclosure rates. Keywords: Housing prices; Foreclosure rate; Idiosyncratic risk; Household leverage; Prediction (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:74:y:2019:i:c:p:175-189 DOI: 10.1016/j.qref.2019.01.015 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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