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The marginal effect of government mortgage guarantees on homeownership

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  • Grundl, Serafin
  • Kim, You Suk

Abstract

The U.S. government guarantees a majority of residential mortgages to promote homeownership. This paper uses property-level data to estimate the effect of government guarantees on homeownership and other housing market outcomes, by exploiting variation of the conforming loan limits (CLLs) along county borders. We find that CLL changes had effects on government guarantees, house prices, house sales and construction activity, but find no robust effect on homeownership. The confidence intervals of our estimates suggest that one additional homeowner corresponds to an increase of government guarantees by at least $6 million. Therefore government guarantees could be considerably reduced with modest effects on homeownership. Our findings are relevant for housing finance reform plans that propose to lower the CLLs.

Suggested Citation

  • Grundl, Serafin & Kim, You Suk, 2021. "The marginal effect of government mortgage guarantees on homeownership," Journal of Monetary Economics, Elsevier, vol. 119(C), pages 75-89.
  • Handle: RePEc:eee:moneco:v:119:y:2021:i:c:p:75-89
    DOI: 10.1016/j.jmoneco.2021.01.003
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    Cited by:

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    More about this item

    Keywords

    Mortgage guarantees; Homeownership; GSE; FHA;
    All these keywords.

    JEL classification:

    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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