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An intertemporal analysis of the shifting of FHA discount points to buyers
Author(s) -
Taylor William M.,
Wichern Dean W.,
Stanley Craig E.
Publication year - 1984
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.4090050409
Subject(s) - point (geometry) , sample (material) , variable (mathematics) , econometrics , economics , business , microeconomics , mathematics , mathematical analysis , chemistry , geometry , chromatography
In this paper, hedonic regressions are used to analyze a seven‐year sample of monthly sales of bungalows in Chicago. Even when sales are considered within individual sections of Chicago, the FHA dummyindependent variable and the ‘points’‐independent variable usually have negative coefficients. In certain areas of Chicago there is an absence of conventional loans and conventionally qualified buyers. Consequently, sellers in these neighborhoods must sell using FHA‐insured mortgages and may be prevented from fully shifting points to the FHA buyer in the absence of competing financing alternatives. The use of FHA mortgages in these transactions means that the standard hedonic approach cannot correctly measure the extent of point‐shifting because the housing/demographic characteristics decrease sales‐prices at the same time the point‐shifting increases them. The estimated FHA coefficients reflect the net result of these effects.