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The causal effect of house prices on mortgage demand and mortgage supply

  • Christoph Basten
  • Cathérine Koch

We identify the causal effect of house prices on mortgage demand and supply in Switzerland by exploiting exogenous shocks to immigration and thereby to house prices. Detailed micro data allow us to observe multiple offers for each mortgage request. We find a 1% increase in house prices to raise the requested mortgage amount by 0.52%. Due to positive feedback effects, the entire partial correlation is 0.78%. While we find higher house prices to increase mortgage demand, they induce banks to make fewer offers and charge higher rates, especially later in the boom and especially for highly leveraged households.

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Paper provided by Department of Economics - University of Zurich in its series ECON - Working Papers with number 140.

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Date of creation: Feb 2014
Date of revision:
Handle: RePEc:zur:econwp:140
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  1. Libertad Gonzalez & Francesc Ortega, 2009. "Immigration and Housing Booms: Evidence from Spain," CReAM Discussion Paper Series 0919, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  2. Albert Saiz, 2003. "Immigration and housing rents in American cities," Working Papers 03-12, Federal Reserve Bank of Philadelphia.
  3. Ana Fostel & John Geanakoplos, 2011. "Tranching, CDS and Asset Prices: How Financial Innovation Can Cause Bubbles and Crashes," Levine's Working Paper Archive 786969000000000168, David K. Levine.
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  7. Hunt, Jennifer & Gauthier-Loiselle, Marjolaine, 2009. "How Much Does Immigration Boost Innovation?," IZA Discussion Papers 3921, Institute for the Study of Labor (IZA).
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  9. David Card, 1996. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," Working Papers 747, Princeton University, Department of Economics, Industrial Relations Section..
  10. Giovanni Favara & Jean Imbs, 2015. "Credit Supply and the Price of Housing," American Economic Review, American Economic Association, vol. 105(3), pages 958-92, March.
  11. Hatice Balli & Bent Sørensen, 2013. "Interaction effects in econometrics," Empirical Economics, Springer, vol. 45(1), pages 583-603, August.
  12. Giovanni Dell'Ariccia & Pau Rabanal & Christopher W. Crowe & Deniz Igan, 2011. "Policies for Macrofinancial Stability: Options to Deal with Real Estate Booms," IMF Staff Discussion Notes 11/02, International Monetary Fund.
  13. Coleman IV, Major & LaCour-Little, Michael & Vandell, Kerry D., 2008. "Subprime lending and the housing bubble: Tail wags dog?," Journal of Housing Economics, Elsevier, vol. 17(4), pages 272-290, December.
  14. Antonio Accetturo & Francesco Manaresi & Sauro Mocetti & Elisabetta Olivieri, 2012. "Don't stand so close to me: the urban impact of immigration," Temi di discussione (Economic working papers) 866, Bank of Italy, Economic Research and International Relations Area.
  15. Manju Puri & Jörg Rocholl & Sascha Steffen, 2011. "Global retail lending in the aftermath of the US financial crisis: Distinguishing between supply and demand effects," NBER Working Papers 16967, National Bureau of Economic Research, Inc.
  16. Degen, Kathrin & Fischer, Andreas M, 2009. "Immigration and Swiss House Prices," CEPR Discussion Papers 7583, C.E.P.R. Discussion Papers.
  17. Manuel Adelino & Antoinette Schoar & Felipe Severino, 2012. "Credit Supply and House Prices: Evidence from Mortgage Market Segmentation," NBER Working Papers 17832, National Bureau of Economic Research, Inc.
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