Homeowner Borrowing and Housing Collateral: New Evidence from Expiring Price Controls

Anthony A. Defusco*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

17 Scopus citations

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 and $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.

Original languageEnglish (US)
Pages (from-to)523-573
Number of pages51
JournalJournal of Finance
Volume73
Issue number2
DOIs
StatePublished - Apr 2018

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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