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The Effect of Mortgage Rate Buydowns on Housing Prices:
Author(s) -
Agarwal Vinod B.,
Phillips Richard A.
Publication year - 1983
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.00303
Subject(s) - subsidy , economics , variable (mathematics) , sample (material) , monetary economics , finance , mathematics , market economy , physics , mathematical analysis , thermodynamics
The model developed in this paper analyzes the effect of builder‐financed FHA‐VA mortgage subsidies or buydowns on the price of housing. Hedonic pricing equations are estimated for a locationally and qualitatively uniform sample of new tract development homes. The explanatory variables are vectors of physical and financial characteristics. The latter include a continuous variable for discount points paid by builders which is indicative of the magnitude of prepaid finance charges. The results indicate that a substantial portion of mortgage subsidy costs are shifted to buyers in the form of inflated housing prices.