Monetary Policy and Home Buying Inequality

Daniel R. Ringo
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Daniel R. Ringo: https://www.federalreserve.gov/econres/daniel-r-ringo.htm

No 2023-006, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: Does monetary policy influence who becomes a home owner? Home purchases by low- and moderate-income households may be particularly sensitive to mortgage interest rates, as these households’ budgets are tighter and they more frequently come up against binding payment-to-income ratio constraints in credit decisions. Exploiting the timing of high-frequency observations of mortgage applicants locking in their interest rates around monetary policy shocks, I find that a 1 percentage point policy-induced increase in mortgage rates lowers the presence of low-income households in the population of home buyers by 1 percentage point, and of low- and moderate-income households by 2 percentage points, immediately following the shock. Effects are substantially stronger among first-time home buyers, and persist for approximately one year.

Keywords: Home ownership; Inequality; Monetary policy; Interest rates; Credit constraints (search for similar items in EconPapers)
JEL-codes: E43 E44 G21 R21 (search for similar items in EconPapers)
Pages: 48 p.
Date: 2023-01-20
New Economics Papers: this item is included in nep-mon and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2023-06

DOI: 10.17016/FEDS.2023.006

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