Shifting credit standards and the boom and bust in U.S. house prices
Duca, J. V., Muellbauer, J. & Murphy, A.
(2011).
Shifting credit standards and the boom and bust in U.S. house prices.
(SERC Discussion Papers SERCDP0076).
Spatial Economics Research Centre (SERC), London School of Economics and Political Science.
The U.S. house price boom has been linked to an unsustainable easing of mortgage credit standards. However, standard time series models of US house prices omit credit constraints and perform poorly in the 2000’s. We incorporate data on credit constraints for first time buyers into a model of US house prices based on the (inverted) demand for housing services. The model yields not only a stable long-run contegrating relationship, a reasonable speed of adjustment, plausible income and price elasticities and an improved fit, but also sensible estimates of tax credit effects and the possible bottom in real house prices.
| Item Type | Working paper |
|---|---|
| Copyright holders | © 2011 The Author |
| Departments | LSE > Research Centres > Centre for Economic Performance > Urban and Spatial Programme |
| Date Deposited | 31 Jul 2014 |
| URI | https://researchonline.lse.ac.uk/id/eprint/58533 |