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Credit Supply and the Housing Boom

Alejandro Justiniano, Giorgio Primiceri () and Andrea Tambalotti ()

No WP-2014-21, Working Paper Series from Federal Reserve Bank of Chicago

Abstract: The housing boom that preceded the Great Recession was due to an increase in credit supply driven by looser lending constraints in the mortgage market. This view on the fundamental drivers of the boom is consistent with four empirical observations: the unprecedented rise in home prices and household debt, the stability of debt relative to house values, and the fall in mortgage rates. These facts are difficult to reconcile with the popular view that attributes the housing boom to looser borrowing constraints associated with lower collateral requirements. In fact, a slackening of collateral constraints at the peak of the lending cycle triggers a fall in home prices in our framework, providing a novel perspective on the possible origins of the bust.

Keywords: Credit; housing prices; mortgages (search for similar items in EconPapers)
JEL-codes: E44 G21 R21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban, nep-dge, nep-mac and nep-ure
Date: 2014-07-01, Revised 2014-03-01
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Related works:
Working Paper: Credit Supply and the Housing Boom (2015) Downloads
Working Paper: Credit supply and the housing boom (2015) Downloads
Working Paper: Credit Supply and the Housing Boom (2015) Downloads
Working Paper: Credit Supply and the Housing Boom (2014) Downloads
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