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Mortgage Lending Limits and Housing Demand: Evidence from Bunching in FHA Borrowing

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  • Heilbron, John

Abstract

I adapt the bunching framework to measure the loan-to-value elasticity of housing demand. Unlike existing literature, my estimator can identify the effect of credit supply while remaining agnostic about how households form beliefs over future housing returns. I measure a statistically significant elasticity of demand, suggesting that households are credit constrained at the time of home purchase. The elasticity is economically small, 14-25bp, suggesting that shocks to credit supply drove housing demand largely through the channel of household beliefs.

Suggested Citation

  • Heilbron, John, 2021. "Mortgage Lending Limits and Housing Demand: Evidence from Bunching in FHA Borrowing," MPRA Paper 125714, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:125714
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • H81 - Public Economics - - Miscellaneous Issues - - - Governmental Loans; Loan Guarantees; Credits; Grants; Bailouts
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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