Leverage and House-Price Dynamics in U.S. Cities

Owen Lamont and Jeremy Stein ()

No 5961, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: In this paper, we use city-level data to analyze the relationship between homeowner borrowing patterns and house-price dynamics. Our principal finding is that in cities where homeowners are more leveraged--i.e., have higher loan-to-value ratios--house prices react more sensitively to city-specific shocks, such as changes in per-capita income. This finding is consistent with recent theories which emphasize the role of collateralized borrowing in shaping the behavior of asset prices.

JEL-codes: G32 R31 (search for similar items in EconPapers)
Date: 1997-03
Note: CF
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Journal Article: Leverage and House-Price Dynamics in U.S. Cities (1999)
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