Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls

Anthony DeFusco

Journal of Finance, 2018, vol. 73, issue 2, 523-573

Abstract: I empirically analyze how changes in access to housing collateral affect homeowner borrowing behavior. To isolate the role of collateral constraints from that of wealth effects, I exploit the fully anticipated expiration of resale price controls on owner‐occupied housing in Montgomery County, Maryland. I estimate a marginal propensity to borrow out of housing collateral that ranges between $0.04 and $0.13 and is correlated with homeowners' initial leverage. Additional analysis of residential investment and ex‐post loan performance indicates that some of the extracted funds generated new expenditures. These results suggest a potentially important role for collateral constraints in driving household expenditures.

Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jfinan:v:73:y:2018:i:2:p:523-573

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