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Securitization and House Price Growth

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  • Genevieve Nelson

    (Bank of Canada)

Abstract

From 2000-2006 U.S. house prices and mortgage credit grew while the relative cost of mortgage credit fell – particularly for privately securitized mortgages – suggesting a credit supply expansion. This paper compares innovations in the securitization of mortgage credit (a credit supply shock) to other candidate credit supply shocks. I model a two-layered mortgage market. This generates a novel balance sheet effect: changes in aggregate mortgage credit quantity are linked to changes in mortgage spreads via the interaction of financially constrained commercial banks and mortgage securitizers. Innovation in securitization (a direct relaxation of the securitizers' financial constraint) matches mortgage market dynamics. (Copyright: Elsevier)

Suggested Citation

  • Genevieve Nelson, 2025. "Securitization and House Price Growth," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 57, July.
    • Handle: RePEc:red:issued:21-353
    DOI: 10.1016/j.red.2025.101287
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    More about this item

    Keywords

    Securitization; Mortgage Credit; House Prices; Non-Banks;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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