Research Details

Abstract

I empirically analyze how changes in access to housing collateral affect homeowner borrowing behavior. To isolate the role of collateral constraints from that of wealth effects, I exploit the fully-anticipated expiration of resale price controls on owner-occupied housing in Montgomery County, Maryland. I estimate a marginal propensity to borrow out of housing collateral that ranges between $0.04?$0.13 and is correlated with homeowners? initial leverage. Additional analysis of residential investment and ex-post loan performance indicates that some of the extracted funds generated new expenditures. These results suggest a potentially important role for collateral constraints in driving household expenditures.

Type

Article

Author(s)

Anthony DeFusco

Date Published

2018

Citations

DeFusco, Anthony. 2018. Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls. Journal of Finance.(2): 523-573.