A quantitative analysis of the U.S. housing and mortgage markets and the foreclosure crisis

Satyajit Chatterjee (chatterjee.satyajit@gmail.com) and Burcu Eyigungor

No 11-26, Working Papers from Federal Reserve Bank of Philadelphia

Abstract: 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 in ation. 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.

Keywords: Foreclosure; Global financial crisis; Mortgage loans (search for similar items in EconPapers)
Date: 2011
New Economics Papers: this item is included in nep-ban, nep-bec, nep-dge and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

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Related works:
Journal Article: A Quantitative Analysis of the US Housing and Mortgage Markets and the Foreclosure Crisis (2015)
Working Paper: A quantitative analysis of the u.s. housing and mortgage markets and the foreclosure crisis (2015)
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