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Working Paper
Endogenous sources of volatility in housing markets: the joint buyer-seller problem
This paper presents new empirical evidence that internal movement--selling one home and buying another--by existing homeowners within a metropolitan housing market is especially volatile and the main driver of fluctuations in transaction volume over the housing market cycle. We develop a dynamic search equilibrium model that shows that the strong pro-cyclicality of internal movement is driven by the cost of simultaneously holding two homes, which varies endogenously over the cycle. We estimate the model using data on prices, volume, time-on-market, and internal moves drawn from Los Angeles ...
Discussion Paper
The Effect of Mortgage Forbearance on House Prices During COVID-19
The contrast between the labor market and house prices during the pandemic has been stark. In this note, we document a strong positive relationship between forbearance takeup and house price growth at the county level, controlling for the unemployment rate and other factors.
Working Paper
Borrowing and Spending in the Money: Debt Substitution and the Cash-out Refinance Channel of Monetary Policy
We show that the strong negative effect of higher mortgage rates on cash-out refinancing reflects substitution into other borrowing products, not large changes in total new household borrowing. We exploit an exogenous increase in long-term rates to show that, in the cross-section of outstanding mortgage rates, changes in cash-out and alternative borrowing are offsetting. Additionally, we instrument using monetary policy surprises to show that, over the period from 2006-2021, changes in cash-out refinancing are offset by alternative borrowing. Our results suggest that debt substitution ...
Working Paper
Borrowing and Spending in the Money: Debt Substitution and the Cash-out Refinance Channel of Monetary Policy
We show that the strong negative effect of higher mortgage rates on cash-out refinancing reflects substitution into other borrowing products, not large changes in total new household borrowing. We exploit an exogenous increase in long-term rates to show that, in the cross-section of outstanding mortgage rates, changes in cash-out and alternative borrowing are offsetting. Additionally, we instrument using monetary policy surprises to show that, over the period from 2006-2021, changes in cash-out refinancing are offset by alternative borrowing. Our results suggest that debt substitution ...
Working Paper
Information frictions and housing market dynamics
This paper examines the effects of seller uncertainty over their home value on the housing market. Using evidence from a new dataset on home listings and transactions, I first show that sellers do not have full information about current period demand conditions for their homes. I incorporate this type of uncertainty into a dynamic search model of the home selling problem with Bayesian learning. Simulations of the estimated model show that information frictions help explain short-run persistence in price appreciation rates and a positive (negative) correlation between price changes and sales ...
Working Paper
Using Data on Seller Behavior to Forecast Short-run House Price Changes
We construct a new "list-price index" that accurately reveals trends in house prices several months before existing sales price indices like Case-Shiller. Our index is based on the repeat-sales approach but for recent months uses listings data, which are available essentially in real time, instead of transactions data, which become available with signiffcant lags. Our index methodology is motivated by a simple model of the home-selling problem that shows how listings variables such as the list price and marketing time help predict the final sales price. In a sample of three large MSAs over ...
Discussion Paper
On the Geographic Scope of Retail Mortgage Markets
In this note, we first discuss why markets for mortgage originations are likely to be national in scope. We then show that even if mortgage markets were local, they would be unconcentrated. Finally, we test for an empirical relationship between the local concentration of mortgage lending and changes in mortgage rates and find essentially no correlation of concentration and rates.
Working Paper
The Propagation of Demand Shocks Through Housing Markets
Housing demand stimulus produces a multiplier effect by freeing up owners attempting to sell their current home, allowing them to re-enter the market as buyers and triggering a chain of further transactions. Exploiting a shock to first-time home buyer demand caused by the 2015 surprise cut in Federal Housing Administration mortgage insurance premiums, we find that homeowners buy their next home sooner when the probability of their current home selling increases. This effect is especially pronounced in cold housing markets, in which homes take a long time to sell. We build and calibrate a ...
Working Paper
Can More Housing Supply Solve the Affordability Crisis? Evidence from a Neighborhood Choice Model
We estimate a neighborhood choice model using 2014 American Community Survey data to investigate the degree to which new housing supply can improve housing affordability. In the model, equilibrium rental rates are determined so that the number of households choosing each neighborhood is equal to the number of housing units in each neighborhood. We use the estimated model to simulate how rental rates would respond to an exogenous increase in the number of housing units in a neighborhood. We find that the rent elasticity is low, and thus marginal reductions in supply constraints alone are ...
Working Paper
Borrowing and Spending in the Money: Debt Substitution and the Cash-out Refinance Channel of Monetary Policy
We show that the strong negative effect of higher mortgage rates on cash-out refinancing reflects substitution into other borrowing products, not large changes in total new household borrowing. We exploit an exogenous increase in long-term rates to show that, in the cross-section of outstanding mortgage rates, changes in cash-out and alternative borrowing are offsetting. Additionally, we instrument using monetary policy surprises to show that, over the period from 2006-2021, changes in cash-out refinancing are offset by alternative borrowing. Our results suggest that debt substitution ...