Credit Supply and the Price of Housing

Giovanni Favara and Jean Imbs

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Abstract: An exogenous expansion in mortgage credit has significant effects on house prices. This finding is established using US branching deregulations between 1994 and 2005 as instruments for credit. Credit increases for deregulated banks, but not in placebo samples. Such differential responses rule out demand-based explanations, and identify an exogenous credit supply shock. Because of geographic diversification, treated banks expand credit: housing demand increases, house prices rise, but to a lesser extent in areas with elastic housing supply, where the housing stock increases instead. In an instrumental variable sense, house prices are well explained by the credit expansion induced by deregulation.

Keywords: credit; house prices (search for similar items in EconPapers)
Date: 2015-03
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Citations: View citations in EconPapers (268)

Published in American Economic Review, 2015, 105 (3), pp.958-992. ⟨10.1257/aer.20121416⟩

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Related works:
Journal Article: Credit Supply and the Price of Housing (2015)
Working Paper: Credit Supply and the Price of Housing (2015)
Working Paper: Credit Supply and the Price of Housing (2015)
Working Paper: Credit Supply and the Price of Housing (2011)
Working Paper: Credit Supply and the Price of Housing (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:hal-01301589

DOI: 10.1257/aer.20121416

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