Mortgage Lending Limits and Housing Demand: Evidence from Bunching in FHA Borrowing

Heilbron, John (2021): Mortgage Lending Limits and Housing Demand: Evidence from Bunching in FHA Borrowing.

Abstract

I adapt the bunching framework to measure the loan-to-value elasticity of housing demand. Unlike existing literature, my estimator can identify the effect of credit supply while remaining agnostic about how households form beliefs over future housing returns. I measure a statistically significant elasticity of demand, suggesting that households are credit constrained at the time of home purchase. The elasticity is economically small, 14-25bp, suggesting that shocks to credit supply drove housing demand largely through the channel of household beliefs.

• Item Type: MPRA Paper
• Language: English
• Keywords: Household Finance, Government Loan Guarantees, Housing Demand
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D12 - Consumer Economics: Empirical Analysis; H - Public Economics > H8 - Miscellaneous Issues > H81 - Governmental Loans ; Loan Guarantees ; Credits ; Grants ; Bailouts; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R2 - Household Analysis > R21 - Housing Demand

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