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House prices and credit constraints: making sense of the U.S. experience

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

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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: C51 C52 E51 G21 R31 (search for similar items in EconPapers)
Date: 2011-03
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http://eprints.lse.ac.uk/58441/ Open access version. (application/pdf)

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 U.S. Experience (2011) Downloads
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
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