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The role of lenders in the home price boom

  • Richard J. Rosen

This paper examines the relationship between real estate prices during the home price boom from the late 1990s into 2005 and competition among mortgage lenders. The mortgage lending business, especially with the rise of the originate-to-distribute model, had competitors with very different non- mortgage activities and regulation. I show that in local markets, when banks increased their share of mortgages relative to lenders such as mortgage brokers, home prices started increasing at a faster pace. Home prices also affected market shares, but primarily through changes at the national level. When national home prices increased at a faster pace, there was a shift from banks to mortgage brokers in local markets.

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Paper provided by Federal Reserve Bank of Chicago in its series Working Paper Series with number WP-08-16.

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Date of creation: 2008
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Handle: RePEc:fip:fedhwp:wp-08-16
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  1. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing high house prices: bubbles, fundamentals, and misperceptions," Staff Reports 218, Federal Reserve Bank of New York.
  2. Edward L. Glaeser & Joseph Gyourko & Raven E. Saks, 2005. "Why Have Housing Prices Gone Up?," Harvard Institute of Economic Research Working Papers 2061, Harvard - Institute of Economic Research.
  3. Joseph Gyourko & Christopher Mayer & Todd Sinai, 2006. "Superstar Cities," NBER Working Papers 12355, National Bureau of Economic Research, Inc.
  4. Karl E. Case & Robert J. Shiller, 2003. "Is There a Bubble in the Housing Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 299-362.
  5. Cabray L. Haines & Richard J. Rosen, 2007. "Bubble, bubble, toil, and trouble," Economic Perspectives, Federal Reserve Bank of Chicago, issue Q I, pages 16-35.
  6. Jonathan McCarthy & Richard W. Peach, 2004. "Are home prices the next "bubble"?," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-17.
  7. Atif Mian & Amir Sufi, 2008. "The Consequences of Mortgage Credit Expansion: Evidence from the 2007 Mortgage Default Crisis," NBER Working Papers 13936, National Bureau of Economic Research, Inc.
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