Shifting credit standards and the boom and bust in U.S. house prices

John Duca, John Muellbauer and Anthony Murphy ()

No 1104, Working Papers from Federal Reserve Bank of Dallas

Abstract: The U.S. house price boom has been linked to an unsustainable easing of mortgage credit standards. However, standard time series models of U.S. house prices omit credit constraints and perform poorly in the 2000s. We incorporate data on credit constraints for first-time buyers into a model of U.S. house prices based on the (inverted) demand for housing services. The model yields not only a stable long-run cointegrating relationship, a reasonable speed of adjustment, plausible income and price elasticities and an improved fit, but also sensible estimates of tax credit effects and the possible bottom in real house prices.

Keywords: Housing - Prices; Credit; Subprime mortgage (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ure
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Related works:
Working Paper: Shifting Credit Standards and the Boom and Bust in U.S. House Prices (2011)
Working Paper: Shifting Credit Standards and the Boom and Bust in US House Prices (2011)
Working Paper: Shifting credit standards and the boom and bust in U.S. house prices (2011)
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