House Price Markups and Mortgage Defaults

Paul Carrillo, William Doerner and William Larson

No 18-02, FHFA Staff Working Papers from Federal Housing Finance Agency

Abstract: The transaction price of identical housing units can vary widely due to heterogeneity in buyer and seller preferences, appraisers, and search costs, generating "markups" above or below the average market price. These markups are mean reverting upon subsequent transactions, suggesting transitory factors play a role in same-unit dynamics. We show markups are an important driver of mortgage delinquencies, defaults, prepayments, and credit losses conditional on default. In general, our findings highlight several important aspects of mortgage risk management, including underwriting, insurance, and unit-level house value dynamics.

Keywords: collateral risk; automated valuation model; Great Recession (search for similar items in EconPapers)
JEL-codes: C43 R14 R30 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2018-04
New Economics Papers: this item is included in nep-rmg and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Forthcoming in Journal of Money, Credit, and Banking, 2023, volume 55, issue 4, pages 747-782

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Related works:
Journal Article: House Price Markups and Mortgage Defaults (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:hfa:wpaper:18-02

DOI: 10.1111/jmcb.12940

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