IDEAS home Printed from https://ideas.repec.org/a/oup/rfinst/v34y2021i8p3742-3788..html
   My bibliography  Save this article

The Effects of a Targeted Financial Constraint on the Housing Market
[Lending implications of U.S. bank stress tests: Costs or benefits?]

Author

Listed:
  • Lu Han
  • Chandler Lutz
  • Benjamin Sand
  • Derek Stacey
  • Stijn Van Nieuwerburgh

Abstract

We study how financial constraints affect the housing market by exploiting a regulatory change that increases the down payment requirement for homes selling for 1M or more. Using Toronto data, we find that the policy causes excess bunching of homes listed at 1M and heightened bidding intensity for these homes, but only a muted response in sales. While difficult to reconcile in a frictionless market, these findings are consistent with the implications derived from an equilibrium search model with auctions and financial constraints. Our analysis points to the importance of designing macroprudential policies that recognize the strategic responses of market participants.

Suggested Citation

  • Lu Han & Chandler Lutz & Benjamin Sand & Derek Stacey & Stijn Van Nieuwerburgh, 2021. "The Effects of a Targeted Financial Constraint on the Housing Market [Lending implications of U.S. bank stress tests: Costs or benefits?]," The Review of Financial Studies, Society for Financial Studies, vol. 34(8), pages 3742-3788.
    • Handle: RePEc:oup:rfinst:v:34:y:2021:i:8:p:3742-3788.
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1093/rfs/hhab047
    Download Restriction: Access to full text is restricted to subscribers.
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. William N Goetzmann & Christophe Spaenjers & Stijn Van Nieuwerburgh, 2021. "Real and Private-Value Assets [Gendered prices]," The Review of Financial Studies, Society for Financial Studies, vol. 34(8), pages 3497-3526.
    2. Antonia Díaz & Belén Jerez & Juan Pablo Rincón-Zapatero, 2023. "Housing Prices and Credit Constraints in Competitive Search," The Economic Journal, Royal Economic Society, vol. 134(657), pages 220-270.
    3. Sonia Gilbukh & Andrew Haughwout & Rebecca J. Landau & Joseph Tracy, 2023. "The price‐to‐rent ratio: A macroprudential application," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(2), pages 503-532, March.

    More about this item

    JEL classification:

    • R51 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Finance in Urban and Rural Economies
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:oup:rfinst:v:34:y:2021:i:8:p:3742-3788.. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Oxford University Press (email available below). General contact details of provider: https://edirc.repec.org/data/sfsssea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.