Working Paper No. 09-22 Foreclosures and House Price Dynamics: a Quantitative Analysis of the Mortgage Crisis and the Foreclosure Prevention Policy
نویسندگان
چکیده
We construct a quantitative equilibrium model of the housing market in which an unanticipated increase in the supply of housing triggers default mortgages via its e ect on house prices. The decline in house prices creates an incentive to increase the consumption of housing space, but leverage makes it costly for homeowners to sell their homes and buy bigger ones (they must absorb large capital losses). Instead, leveraged households nd it advantageous to default and rent housing space. Since renters demand less housing space than homeowners, foreclosures are a negative force a ecting house prices. We explore the possible e ects of the government's foreclosure prevention policy in our model. We nd that the policy can temporarily reduce foreclosures and shore up house prices.
منابع مشابه
Neighborhood effects of concentrated mortgage foreclosures
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