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Do household energy expenditures affect mortgage delinquency rates?

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  • Kaufmann, Robert K.
  • Gonzalez, Nancy
  • Nickerson, Thomas A.
  • Nesbit, Tyler S.

Abstract

We postulate a direct role for energy prices in the 2008 financial crisis. Rising energy prices constrain consumer budgets and thereby raise mortgage delinquency rates. This hypothesis is tested by estimating a quarterly cointegrating vector autoregressive (CVAR) model that seeks to quantify the factors that influence the percentage of US mortgages that are 30 to 89 days past due and those that enter foreclosure. Results identify a long-run relationship for the percentage of US mortgages that are 30 to 89 days past due that includes the interest rate on one-year adjustable mortgages, household expenditures on energy, nominal home prices, rates of home ownership, and the fraction of mortgages 90 days or more past due that enter foreclosure--unemployment rates have a short-run effect. Together, these variables account for much of the historical variation in the percentage of US mortgages that are 30 to 89 days past due and indicate that the post 2006 rise in this measure of mortgage delinquency is associated with falling home prices, an increase in household expenditures on energy, and rising unemployment.

Suggested Citation

  • Kaufmann, Robert K. & Gonzalez, Nancy & Nickerson, Thomas A. & Nesbit, Tyler S., 2011. "Do household energy expenditures affect mortgage delinquency rates?," Energy Economics, Elsevier, vol. 33(2), pages 188-194, March.
  • Handle: RePEc:eee:eneeco:v:33:y:2011:i:2:p:188-194
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    References listed on IDEAS

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    Cited by:

    1. Brecha, Robert J., 2012. "Logistic curves, extraction costs and effective peak oil," Energy Policy, Elsevier, vol. 51(C), pages 586-597.
    2. Breitenfellner, Andreas & Crespo Cuaresma, Jesús & Mayer, Philipp, 2015. "Energy inflation and house price corrections," Energy Economics, Elsevier, vol. 48(C), pages 109-116.
    3. Gupta, Rangan & Kotzé, Kevin, 2017. "The role of oil prices in the forecasts of South African interest rates: A Bayesian approach," Energy Economics, Elsevier, vol. 61(C), pages 270-278.
    4. Robert J. Brecha, 2013. "Ten Reasons to Take Peak Oil Seriously," Sustainability, MDPI, Open Access Journal, vol. 5(2), pages 1-31, February.
    5. Nikolaos Antonakakis & Rangan Gupta & John W. Muteba Mwamba, 2016. "Dynamic Comovements Between Housing and Oil Markets in the US over 1859 to 2013: a Note," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 377-386, September.
    6. repec:eee:jebusi:v:93:y:2017:i:c:p:15-28 is not listed on IDEAS
    7. Killins, Robert N. & Egly, Peter V. & Escobari, Diego, 2017. "The impact of oil shocks on the housing market: Evidence from Canada and U.S," Journal of Economics and Business, Elsevier, vol. 93(C), pages 15-28.
    8. Agnello, Luca & Castro, Vitor & Hammoudeh, Shawkat & Sousa, Ricardo M., 2017. "Spillovers from the oil sector to the housing market cycle," Energy Economics, Elsevier, vol. 61(C), pages 209-220.

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