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

DEFUSCO ANTHONY A. | Zendy

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

Author(s) -

DEFUSCO ANTHONY A.

Publication year - 2018

Publication title -

the journal of finance

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 18.151

H-Index - 299

eISSN - 1540-6261

pISSN - 0022-1082

DOI - 10.1111/jofi.12602

Subject(s) - collateral , leverage (statistics) , marginal propensity to consume , loan , monetary economics , investment (military) , exploit , business , economics , microeconomics , finance , market liquidity , machine learning , politics , computer security , computer science , law , political science

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.

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