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Do Changes in Mortgage Credit Constraints Explain the Housing Boom and Bust?

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  • Andra C. Ghent

Abstract

This paper documents patterns in US mortgage debt and home ownership in recent decades and explores how well changes in mortgage credit constraints can explain these changes. The age-adjusted home ownership rate declined slightly between 2000 and 2007, but the real stock of residential mortgage debt doubled. Since 2007, age-adjusted home ownership rates have trended down significantly as has the real stock of residential mortgage debt. The paper builds an equilibrium life-cycle model of tenure and mortgage choice that shows that a relaxation of the Loan-to-Value (LTV) constraint increases the homeownership rate for young, high-income households.

Suggested Citation

  • Andra C. Ghent, 2018. "Do Changes in Mortgage Credit Constraints Explain the Housing Boom and Bust?," Community Development Publications and Reports, Federal Reserve Bank of St. Louis, pages 1-58, October.
    • Handle: RePEc:fip:l00101:103214
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    File URL: https://fraser.stlouisfed.org/title/tipping-points-iii-debt-financed-homeownership-evolution-impact-future-9374/changes-mortgage-credit-constraints-explain-housing-boom-bust-685760
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