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Credit supply and house prices: Evidence from mortgage market segmentation

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  • Adelino, Manuel
  • Schoar, Antoinette
  • Severino, Felipe

Abstract

This paper develops a difference-in-differences estimator that uses annual changes in the conforming loan limit and the 80% loan-to-value (LTV) threshold to isolate the impact of easier access to credit on house prices. Houses that become eligible for financing with an 80% LTV conforming loan increase in value by about $1.17 per square foot, controlling for a rich set of characteristics. Our estimates imply a local elasticity of house prices to interest rates below 6, which suggests that interest rates are capitalized into prices to a lesser extent than proposed by studies relying on more aggregate variation.

Suggested Citation

  • Adelino, Manuel & Schoar, Antoinette & Severino, Felipe, 2025. "Credit supply and house prices: Evidence from mortgage market segmentation," Journal of Financial Economics, Elsevier, vol. 163(C).
  • Handle: RePEc:eee:jfinec:v:163:y:2025:i:c:s0304405x24001818
    DOI: 10.1016/j.jfineco.2024.103958
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    More about this item

    Keywords

    Mortgage markets; CLL; Interest rate; GSE;
    All these keywords.

    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • R20 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - General

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