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House Prices and Credit Constraints: Making Sense of the US Experience

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

No 8360, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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: credit standards; house price to rent ratio; house prices; subprime mortgages (search for similar items in EconPapers)
JEL-codes: C51 C52 E51 G21 R31 (search for similar items in EconPapers)
Date: 2011-04
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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 U.S. 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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