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Household mortgage refinancing decisions are neighbor influenced, especially along racial lines

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  • McCartney, W. Ben
  • Shah, Avni M.

Abstract

Neighborhood peer effects have been shown to affect households publicly observable decisions, but how they affect private decisions, like mortgage refinancing, remains unclear. Using precisely geolocated data and a nearest-neighbor research design, we find that households are 7% more likely to refinance if a neighbor within 50 m has recently refinanced. Consistent with a word-of-mouth mechanism, social influence effects are stronger when neighbors live especially nearby, weaker when owners are non-occupants, and stronger when neighbors and owners are of the same race. Our results suggest an important role for neighborhood peer effects in explaining regional variation in refinancing activity.

Suggested Citation

  • McCartney, W. Ben & Shah, Avni M., 2022. "Household mortgage refinancing decisions are neighbor influenced, especially along racial lines," Journal of Urban Economics, Elsevier, vol. 128(C).
  • Handle: RePEc:eee:juecon:v:128:y:2022:i:c:s0094119021000917
    DOI: 10.1016/j.jue.2021.103409
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    More about this item

    Keywords

    Household finance; Refinancing; Peer effects; Neighborhoods;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D71 - Microeconomics - - Analysis of Collective Decision-Making - - - Social Choice; Clubs; Committees; Associations
    • H31 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - Household
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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