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Real Estate Volatility and Mortgage Market Woes: An Analysis of Defaults and Foreclosures

Author

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  • Judith Swisher
  • Thomas N. Edmonds

Abstract

This research examines US mortgage defaults and foreclosures and howthey relate to housing price changes and unemployment. State level dataare examined to exploit the wide variation in economic and housingconditions across the country, as well as differences in state foreclosurelaws. In addition to examining the performance of all mortgage loans, primeand subprime mortgages are analyzed separately to assess differences inperformance between the two types of mortgages. Results show thatdefaults and foreclosure are positively related to unemployment andnegatively related to the change in housing values. In addition, large dropsin home values, which proxy for negative equity, are positively related todefault and foreclosure. Examination of prime and subprime mortgagesshows that subprime mortgages are less sensitive to unemployment thanare prime mortgages. Differences in the legal rights of lenders andborrowers across the states also have an impact on defaults andforeclosures.

Suggested Citation

  • Judith Swisher & Thomas N. Edmonds, 2016. "Real Estate Volatility and Mortgage Market Woes: An Analysis of Defaults and Foreclosures," ERES eres2016_283, European Real Estate Society (ERES).
    • Handle: RePEc:arz:wpaper:eres2016_283
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    More about this item

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

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