Credit supply and house prices: Evidence from mortgage market segmentation

Manuel Adelino, Antoinette Schoar and Felipe Severino

Journal of Financial Economics, 2025, vol. 163, issue C

Abstract: This paper develops a difference-in-differences estimator that uses annual changes in the conforming loan limit and the 80% loan-to-value (LTV) threshold to isolate the impact of easier access to credit on house prices. Houses that become eligible for financing with an 80% LTV conforming loan increase in value by about $1.17 per square foot, controlling for a rich set of characteristics. Our estimates imply a local elasticity of house prices to interest rates below 6, which suggests that interest rates are capitalized into prices to a lesser extent than proposed by studies relying on more aggregate variation.

Keywords: Mortgage markets; CLL; Interest rate; GSE (search for similar items in EconPapers)
JEL-codes: D10 D12 R20 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:163:y:2025:i:c:s0304405x24001818

DOI: 10.1016/j.jfineco.2024.103958

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