Mortgage Lending Limits and Housing Demand: Evidence from Bunching in FHA Borrowing

John Heilbron

MPRA Paper from University Library of Munich, Germany

Abstract: I adapt the bunching framework to measure the loan-to-value elasticity of housing demand. Unlike existing literature, my estimator can identify the effect of credit supply while remaining agnostic about how households form beliefs over future housing returns. I measure a statistically significant elasticity of demand, suggesting that households are credit constrained at the time of home purchase. The elasticity is economically small, 14-25bp, suggesting that shocks to credit supply drove housing demand largely through the channel of household beliefs.

Keywords: Household Finance; Government Loan Guarantees; Housing Demand (search for similar items in EconPapers)
JEL-codes: D12 H81 R21 (search for similar items in EconPapers)
Date: 2021-11-18
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:125714

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