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House Price Markups and Mortgage Defaults

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Listed:
  • PAUL E. CARRILLO
  • WILLIAM M. DOERNER
  • WILLIAM D. LARSON

Abstract

The transaction price of identical housing units can vary widely due to heterogeneity in buyer and seller preferences, matching, and search costs, generating what we term “markups” above or below the average market price. We measure markups for 3.4 million purchase‐money mortgages and show that they can predict mortgage defaults and credit losses conditional on default even after accounting for collateral coverage (loan‐to‐value ratio) and a comprehensive set of other covariates. The findings suggest that standard collateral coverage estimation may be inaccurate, with implications for both individual and portfolio‐level credit risk assessment.

Suggested Citation

  • Paul E. Carrillo & William M. Doerner & William D. Larson, 2023. "House Price Markups and Mortgage Defaults," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 55(4), pages 747-782, June.
    • Handle: RePEc:wly:jmoncb:v:55:y:2023:i:4:p:747-782
    DOI: 10.1111/jmcb.12940
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    Cited by:

    1. Paul Calem & Jeanna Kenney & Lauren Lambie‐Hanson & Leonard Nakamura, 2021. "Appraising home purchase appraisals," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 49(S1), pages 134-168, March.

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    More about this item

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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