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Working Paper
Who Bears Climate-Related Physical Risk?
This paper combines data on current and future property-level physical risk from major climate-related perils (storms, floods, hurricanes, and wildfires) that owner-occupied single-family residences face with data on local economic characteristics to study the geographic and demographic distribution of such risks in the contiguous United States. Current expected damage from climate-related perils is approximately $19 billion per year. Severe convective storms and inland floods account for almost half of the expected damage. The central and southern parts of the U.S. are most exposed to ...
Discussion Paper
Breaking Down Auto Loan Performance
Debt balances continued to rise at a moderate pace in the fourth quarter of 2024, and delinquencies, particularly for auto loans and credit cards, remained elevated, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Auto loan balances have grown steadily since 2011, expanding by $48 billion in 2024. This increase reflects a steady inflow of newly originated auto loan balances, which in 2024 were boosted primarily by originations to very prime borrowers (those with credit scores over 760) while originations to ...
Discussion Paper
Income Growth Outpaces Household Borrowing
U.S. household debt balances grew by $147 billion (0.8 percent) over the third quarter, according to the latest Quarterly Report on Household Debt and Credit from the New York Fed’s Center for Microeconomic Data. Balances on all loan products recorded moderate increases, led by mortgages (up $75 billion), credit cards (up $24 billion), and auto loans (up $18 billion). Meanwhile, delinquency rates have also risen over the past two years, returning to roughly pre-pandemic levels (and exceeding them in the case of credit cards and auto loans), though there are some signs of stabilization ...
Working Paper
Aging and Housing Returns
Older home sellers receive lower returns than younger home sellers. Homes sold by older people have fewer major renovations but higher rates of poor upkeep. Older sellers are also more likely to sell off-MLS (“pocket listings”) and to sell to investors, leading to lower prices. These patterns suggest that older sellers may be disproportionately disadvantaged by agents’ incentive to maximize fees through generating high sales volume instead of maximizing sale prices. Age-related cognitive decline makes the elderly more vulnerable. For causal evidence, we show that reforms making private ...
Working Paper
Nominal Maturity Mismatch and the Liquidity Cost of Inflation
We document a liquidity channel through which unexpected inflation generates substantial welfare losses. Households hold nominal liabilities with longer duration than their nominal assets. Due to this mismatch, losses from unexpected inflation concentrate over short horizons while gains accumulate over the long run, harming liquidity-constrained households who cannot borrow against future gains. The 2021–2022 inflation shock caused welfare losses valued at 1.1% of lifetime wealth for the lower half of the wealth distribution—equivalent in dollar terms to 47% of annual consumption. More ...
Working Paper
Dynastic Home Equity
Using a nationally-representative panel of consumer credit records for the US from 1999 to 2021, we document a positive correlation between child and parent homeownership. We propose a new causal mechanism behind this relationship: parents extract home equity to help finance their child’s home purchase. To identify the mechanism, we use fixed effect, event study, local projection and matching methods. We find that children whose parents extract equity: (i) are 60-80% more likely to become homeowners; (ii) have lower leverage at origination; and (iii) buy higher-valued homes and at a younger ...
Discussion Paper
How Are They Now? A Checkup on Homeowners Who Experienced Foreclosure
The end of the Great Recession marked the beginning of the longest economic expansion in U.S. history. The Great Recession, with its dramatic housing bust, led to a wave of home foreclosures as overleveraged borrowers found themselves unable to meet their payment obligations. In early 2009, the New York Fed’s Research Group launched the Consumer Credit Panel (CCP), a foundational data set of the Center for Microeconomic Data, to monitor the financial health of Americans as the economy recovered. The CCP, which is based on anonymized credit report data from Equifax, gives us an opportunity ...
Working Paper
Nominal Maturity Mismatch and the Liquidity Cost of Inflation
We document a liquidity channel through which unexpected inflation generates substantial welfare losses. Household balance sheets are nominal maturity mismatched: nominal liabilities have a longer duration than nominal assets. Due to this mismatch, losses from unexpected inflation are concentrated over short time horizons, while gains are spread out over the longer run. This has negative effects on liquidity-constrained households, who cannot easily borrow against their future gains. We quantify the importance of the liquidity channel and show that, for households in the lower half of the ...
Discussion Paper
Who’s Paying Those Overdraft Fees?
One criticism of overdraft credit is that the fees seem borne disproportionately by low-income, Black, and Hispanic households. To investigate this concern, we surveyed around 1,000 households about their overdraft activity. Like critics, we find that these groups do tend to overdraft more often. However, when we control for respondents’ credit scores along with their socioeconomic characteristics, we discover that only their credit score predicts overdraft activity. While it’s not altogether surprising that credit constrained households overdrew more often, it’s noteworthy that ...
Discussion Paper
When the Household Pie Shrinks, Who Gets Their Slice?
When households face budgetary constraints, they may encounter bills and debts that they cannot pay. Unlike corporate credit, which typically includes cross-default triggers, households can be delinquent on a specific debt without repercussions from their other lenders. Hence, households can choose which creditors are paid. Analyzing these choices helps economists and investors better understand the strategic incentives of households and the risks of certain classes of credit.