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House Prices and Credit Constraints: Making Sense of the U.S. Experience

John Duca, John Muellbauer () and Anthony Murphy ()

SERC Discussion Papers from Spatial Economics Research Centre, LSE

Abstract: Most US house price models break down in the mid-2000's, due to the omission of exogenous changes in mortgage credit supply (associated with the sub-prime mortgage boom) from house price-to-rent ratio and inverted housing demand models. Previous models lack data on credit constraints facing first-time home-buyers. Incorporating a measure of credit conditions - the cyclically adjusted loan-to-value ratio for first time buyers - into house price to rent ratio models yields stable long-run relationships, more precisely estimated effects, reasonable speeds of adjustment and improved model fits.

Keywords: house prices; credit standards; subprime mortgages (search for similar items in EconPapers)
JEL-codes: R31 G21 E51 C51 C52 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban and nep-ure
Date: 2011-03
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Related works:
Journal Article: House Prices and Credit Constraints: Making Sense of the US Experience (2011)
Working Paper: House Prices and Credit Constraints: Making Sense of the US Experience (2011) Downloads
Working Paper: House prices and credit constraints: making sense of the U.S. experience (2011) Downloads
Working Paper: House prices and credit constraints: making sense of the U.S. experience (2011) Downloads
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