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Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls, Journal of Finance

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

2017

Citations

DeFusco, Anthony. 2017. Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls. Journal of Finance. 73(2): 523-573.

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