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Supply restrictions, subprime lending and regional US house prices

Andre Anundsen () and Christian Heebøll ()
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Christian Heebøll: Department for Convergence and Competitiveness, European Central Bank

No 2014/18, Working Paper from Norges Bank

Abstract: With regard to the recent US house price cycle, we analyze how the interaction between housing supply restrictions, mortgage credit constraints and a price-to-price feedback loop affects house price volatility. Considering 247 Metropolitan Statistical Areas, we estimate a simultaneous boom-bust system for house prices, housing supply and subprime lending. The model accounts for regional differences in supply elasticities that are determined by local variations in topographical and regulatory supply restrictions. Our results suggest that tighter supply restrictions lead to both a larger house price boom and bust, and that this is due to supply restricted areas being signi cantly more exposed to a financial accelerator effect and a price-to-price expectation mechanism. We further find that the presence of endogenous price acceleration mechanisms contribute to dilute the positive relationship between the total quantity response and the supply elasticity.

Keywords: Regional boom-bust cycles; Housing supply restrictions; Subprime lending; Financial accelerator (search for similar items in EconPapers)
JEL-codes: E32 E44 G21 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2014-12-22
New Economics Papers: this item is included in nep-ban, nep-mac and nep-ure
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Citations: View citations in EconPapers (1)

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http://www.norges-bank.no/en/Published/Papers/Working-Papers/2014/201418/

Related works:
Journal Article: Supply restrictions, subprime lending and regional US house prices (2016) Downloads
Working Paper: Supply Restrictions, Subprime Lending and Regional US House Prices (2015) Downloads
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