We examine the role of borrower concerns about future credit availability in mitigating the effects of adverse selection and income misrepresentation in the mortgage market. We show that the majority ...of additional risk associated with "low-doc" mortgages originated prior to the Great Recession was due to adverse selection on the part of borrowers who could verify income but chose not to. We provide novel evidence that these borrowers were more likely to inflate or exaggerate their income. Our analysis suggests that recent regulatory changes that have essentially eliminated the low-doc loan product would result in credit rationing against self-employed borrowers.
We extend the debate on the benefits to increasing the minimum wage by examining the impact on expenses associated with shelter, a previously unexplored area. Our analysis uses a unique data set that ...tracks household rental payments. Increases in state minimum wages significantly reduce the incidence of renters defaulting on their lease contracts by 1.7 percentage points over three months, relative to similar renters who did not experience an increase in the minimum wage. This represents 10.6% fewer monthly defaults. However, this effect slowly decreases over time as landlords react to wage increases by increasing rents.
This paper examines the long-run relation between prices and rents for houses in Amsterdam from 1650 to 2005. We estimate the deviation of house prices from fundamentals and find that these ...deviations can be persistent and long-lasting. Furthermore, we look at the feedback mechanisms between housing market fundamentals and prices, and find that market correction of the mispricing occurs mainly through prices not rents. This correction back to equilibrium, however, can take decades.
Abstract
We test for pricing disparities in mortgage contracts using a novel data set that allows us to observe the race and ethnicity of both parties to the loan. We find that minorities pay between ...3% and 5% more in fees than similarly qualified whites when obtaining a loan through the same white broker. Critically, we find that the premium paid by minorities depends on the race of the broker. We also examine recent policy changes around broker compensation rules that may not only reduce these price disparities but may also limit access to credit for minorities.
This paper investigates how market participants form risk perspectives through a sequence of information shocks. Guided by a theoretical Bayesian learning model, we exploit a natural experiment ...afforded by the fracking boom in Pennsylvania in the late-2000s. We empirically examine whether familiarity with historical conventional gas explorations affects the willingness to pay for houses near fracking wells. We find the local real estate market is very efficient with participants rapidly collecting and processing market–relevant new information. We also find that participants discount historical events and rely on current information to estimate the risk of a change in market conditions.
We explore the role of information asymmetry and regulations on equilibrium outcomes in rental markets to show that while landlords price the cost of regulations into rent, they also invest in tenant ...screening to alleviate information asymmetry, thus restricting access to rental housing. We are the first to document this additional tenant screening in response to regulations.
Housing Rents and Inflation Rates AMBROSE, BRENT W.; COULSON, N. EDWARD; YOSHIDA, JIRO
Journal of money, credit and banking,
June 2023, Letnik:
55, Številka:
4
Journal Article
Recenzirano
This paper develops a quality‐adjusted measure of marginal housing rents using a monthly statistic of landlord net rental income. The marginal rent index (MRI) exhibits deflation during recessions ...and leads the official rent index by 7 months. The modified inflation rate based on MRI suggests that the annual official inflation rate was overestimated by 1.7–4.1% during the Great Recession but underestimated by 0.3–0.7% during the subsequent expansionary period.
The real estate literature recognizes the real option to invest in capital expenditures (CAPEX) or sell a property but treats these options as independent. We show that these real options are ...interconnected. We provide empirical evidence that, consistent with the real option framework, CAPEX increases in income growth expectations but declines in their volatility; that CAPEX are partially capitalized into property market values; and that CAPEX significantly reduce the subsequent likelihood of sale. We also present evidence that, controlling for market timing, past property performance influences CAPEX but not disposition choices, consistent with a value-add investment strategy.
THE REPEAT RENT INDEX Ambrose, Brent W.; Coulson, N. Edward; Yoshida, Jiro
The review of economics and statistics,
12/2015, Letnik:
97, Številka:
5
Journal Article
Recenzirano
We employ a weighted repeat rent estimator to construct quarterly indexes that expand the profession's ability to make cross-sectional comparisons of housing markets. Our analysis shows that there is ...considerable heterogeneity in the behavior of rents across cities over the 2000-2010 decade, but the number of cities and years for which nominal rents fell is substantial; rents fell in many cities following the onset of the housing crisis in 2007; and the repeat rent and Bureau of Labor Statistics indexes differ due to sampling and construction methods.
Can regulation de-bias appraisers? Agarwal, Sumit; Ambrose, Brent W.; Yao, Vincent W.
Journal of financial intermediation,
October 2020, 2020-10-00, Letnik:
44
Journal Article
Recenzirano
This paper examines the effect of a regulatory action (the Home Valuation Code of Conduct) that was designed to reduce the incidence of inflated collateral valuations. We identify the impact of the ...regulation using a difference-in-difference identification strategy. Our baseline results confirm that the regulation reduced inflated valuations in refinance transactions by 16% in the large lender sample, compared to small lenders and a placebo sample. The effect is most significant in low-liquidity and low-distress markets, but not in other markets. We find that the regulation had a significant impact on loan to value ratio and interest rate, and it also led to a significant increase in defaults but a decrease in prepayments.
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