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Working Paper
Gifts, down payments, and housing affordability
Recent evidence shows that homeownership rates among young households have declined substantially since the mid 1980s. Although factors such as late household formation and the increasing user cost of housing are contributing factors, reduced affordability is also a concern. Aggregate data indicate that first-time buyers are relying more heavily on gifts from relatives and less on own savings in accumulating the down payment. ; This paper explores the role of gifts in helping first-time buyers purchase a home using data from two different sources: surveys of recent home buyers in 18 cities ...
Working Paper
Unifying empirical and theoretical models of housing supply.
Housing supply plays an important role in the volatility of macroeconomic cycles and the speed with which house prices respond to changes in demand, yet it is understudied in the current literature. In this paper we present and estimate a new model of the supply of residential construction that is consistent with the theoretical treatment of land development and urban growth. This model shows that new housing construction is best described as a function of changes in house prices and costs rather than as a function of the levels of those variables. Previous research that uses the price levels ...
Report
Assessing high house prices: bubbles, fundamentals, and misperceptions
We construct measures of the annual cost of single-family housing for 46 metropolitan areas in the United States over the last 25 years and compare them with local rents and incomes as a way of judging the level of housing prices. Conventional metrics like the growth rate of house prices, the price-to-rent ratio, and the price-to-income ratio can be misleading because they fail to account both for the time series pattern of real long-term interest rates and predictable differences in the long-run growth rates of house prices across local markets. These factors are especially important in ...
Working Paper
Intergenerational transfers, borrowing constraints, and saving behavior: evidence from the housing market
This paper examines the effects of intergenerational transfers on saving behavior by examining private wealth transfers targeted toward first-time home purchases. The study of transfer behavior in the housing market is advantageous for a number of reasons: the down payment requirement associated with home purchase can be thought of as an important, well-defined borrowing constraint that most U.S. households face; private wealth transfers targeted to home purchases are significant; and home equity is a highly important component of household wealth in the United States. The empirical analysis ...
Journal Article
Gifts for home purchase and housing market behavior
Rapid increases in house prices can make home ownership more difficult for prospective first-time home buyers by increasing the required down payment amount and, if the increases outpace income growth, by increasing the ratio of mortgage payments to income. In response to such constraints, households may seek a gift or loan from a family member to use as part of the down payment. ; Family transfers for housing purchase may be useful in understanding the relationship between housing finance and housing markets. Gifts may play a critical role for some households in home purchase activity in ...
Journal Article
Government regulation and changes in the affordable housing stock
This paper was presented at the conference "Policies to Promote Affordable Housing," cosponsored by the Federal Reserve Bank of New York and New York University's Furman Center for Real Estate and Urban Policy, February 7, 2002. It was part of Session 2: Affordable Housing and the Housing Market.
Working Paper
Equity and time to sale in the real estate market
Estimates from the Boston condominium market show that owners with high loan-to-value ratios take longer to sell their properties than owners with low loan-to-value ratios. When sold, properties with high loan-to-value ratios receive a higher price than units with less debt. Both of these results are consistent with a search model in which owners "constrained" by large amounts of debt set a higher reservation price than "unconstrained" owners, accepting a lower probability of sale in exchange for a higher final sales price, and thus lend credibility to theoretical models that establish a ...
Working Paper
The rise in mortgage defaults
The main factors underlying the rise in mortgage defaults appear to be declines in house prices and deteriorated underwriting standards, in particular an increase in loan-to-value ratios and in the share of mortgages with little or no documentation of income. Contrary to popular perception, the growth in unconventional mortgages products, such as those with prepayment penalties, interest-only periods, and teaser interest rates, does not appear to be a significant factor in defaults through mid-2008 because borrowers who had problems with these products could refinance into different ...