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Bank Real Estate Lending and the New England Capital Crunch

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  • Joe Peek
  • Eric S. Rosengren

Abstract

The stock of real estate loans held by New England banks has declined dramatically. Given the limited potential for real estate investments, weak demand for real estate loans is to be expected. However, supply as well as demand factors may account for some of the decline in bank real estate loans. This paper documents that bank lending for real estate may have been constrained by a capital crunch, whereby poorly capitalized banks shrank their assets, including real estate loans, to satisfy capital requirements. Because the loss of bank capital is so widespread in New England, bank-dependent borrowers may have difficulty obtaining real estate financing. Copyright American Real Estate and Urban Economics Association.

Suggested Citation

  • Joe Peek & Eric S. Rosengren, 1994. "Bank Real Estate Lending and the New England Capital Crunch," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 22(1), pages 33-58.
  • Handle: RePEc:bla:reesec:v:22:y:1994:i:1:p:33-58
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    References listed on IDEAS

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    1. Joe Peek & James A. Wilcox, 1991. "The Measurement and Determinants of Single-Family House Prices," Real Estate Economics, American Real Estate and Urban Economics Association, pages 353-382.
    2. Ozanne, Larry & Thibodeau, Thomas, 1983. "Explaining metropolitan housing price differences," Journal of Urban Economics, Elsevier, vol. 13(1), pages 51-66, January.
    3. Patric H. Hendershott & Thomas G. Thibodeau, 1990. "The Relationship between Median and Constant Quality House Prices: Implications for Setting FHA Loan Limits," Real Estate Economics, American Real Estate and Urban Economics Association, pages 323-334.
    4. Hendershott, Patric H & Peek, Joe, 1992. "Treasury Bill Rates in the 1970s and 1980s," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 24(2), pages 195-214, May.
    5. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, pages 125-137.
    6. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, pages 253-273.
    7. H. Leroy Gill & Donald R. Haurin, 1991. "User Cost and the Demand for Housing Attributes," Real Estate Economics, American Real Estate and Urban Economics Association, pages 383-396.
    8. Gabriel, Stuart A. & Shack-Marquez, Janice & Wascher, William L., 1993. "Does migration arbitrage regional labor market differentials?," Regional Science and Urban Economics, Elsevier, vol. 23(2), pages 211-233, April.
    9. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, pages 125-137.
    10. Winkler, Anne E., 1992. "The impact of housing costs on the living arrangements of single mothers," Journal of Urban Economics, Elsevier, vol. 32(3), pages 388-403, November.
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