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Credit Supply and Housing Speculation

Author

Listed:
  • Atif Mian

    (Princeton University)

  • Amir Sufi

    (University of Chicago)

Abstract

Speculation is a critical channel through which credit supply expansion affects the housing cycle. The surge in private label mortgage securitization in 2003 fueled a large expansion in mortgage credit supply by lenders financed with non-core deposits. Areas more exposed to these lenders experienced a large relative rise in transaction volume driven by a small group of speculators, and these areas simultaneously witnessed an amplified housing boom and bust. Consistent with the importance of belief heterogeneity, house price growth expectations of marginal buyers rose during the boom, while housing market pessimism among the general population increased.

Suggested Citation

  • Atif Mian & Amir Sufi, 2019. "Credit Supply and Housing Speculation," Working Papers 2019-23, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2019-23
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    Keywords

    Speculation; Housing; Credit supply; Mortgage;
    All these keywords.

    JEL classification:

    • E03 - Macroeconomics and Monetary Economics - - General - - - Behavioral Macroeconomics
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G2 - Financial Economics - - Financial Institutions and Services
    • G4 - Financial Economics - - Behavioral Finance
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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