IDEAS home Printed from https://ideas.repec.org/a/fip/fedfel/y2007ijun8n2007-14.html
   My bibliography  Save this article

House prices and subprime mortgage delinquencies

Author

Listed:
  • Mark Doms
  • Frederick T. Furlong
  • John Krainer

Abstract

In this Economic Letter, we explore how the pace of and change in house-price appreciation can affect the incentives and opportunities for borrowers in a market to avoid delinquencies and foreclosures. For instance, with likely gains in home equity in markets where house prices have risen significantly, a homeowner should have greater incentives and opportunities to keep a mortgage loan current. Indeed, we show that markets that recently experienced greater house-price appreciation tended to have lower delinquency rates and smaller increases in delinquency rates. We also find that metropolitan areas where house prices decelerated the most in 2006 have experienced the largest increases in subprime delinquency rates. One of several possible explanations for this relationship is that, in the face of sharp declines in the pace of house-price appreciation, some borrowers may have lowered their expectations about future appreciation rates, and, hence, the attractiveness of the investment component of homeownership also declined.

Suggested Citation

  • Mark Doms & Frederick T. Furlong & John Krainer, 2007. "House prices and subprime mortgage delinquencies," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue jun8.
  • Handle: RePEc:fip:fedfel:y:2007:i:jun8:n:2007-14
    as

    Download full text from publisher

    File URL: http://www.frbsf.org/publications/economics/letter/2007/el2007-14.html
    Download Restriction: no

    File URL: http://www.frbsf.org/publications/economics/letter/2007/el2007-14.pdf
    Download Restriction: no

    Citations

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


    Cited by:

    1. Janet L. Yellen, 2008. "Credit, housing, commodities, and the economy," Speech 56, Federal Reserve Bank of San Francisco.
    2. Janet L. Yellen, 2008. "The financial markets, housing, and the economy," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue apr18.
    3. Mark Doms & Frederick T. Furlong & John Krainer, 2007. "Subprime mortgage delinquency rates," Working Paper Series 2007-33, Federal Reserve Bank of San Francisco.
    4. Stefano Puddu & Andreas Waelchli, 2015. "TAF Effect on Liquidity Risk Exposure," IRENE Working Papers 15-07, IRENE Institute of Economic Research.

    More about this item

    Keywords

    Housing - Prices ; Mortgage loans;

    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:fip:fedfel:y:2007:i:jun8:n:2007-14. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Federal Reserve Bank of San Francisco Research Library). General contact details of provider: http://edirc.repec.org/data/frbsfus.html .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.