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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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File URL: http://www.econ.uzh.ch/static/wp/econwp140.pdf
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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
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Handle: RePEc:zur:econwp:140
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  1. Fischer, Andreas M., 2012. "Immigrant language barriers and house prices," Regional Science and Urban Economics, Elsevier, vol. 42(3), pages 389-395.
  2. Gauthier-Loiselle, Marjolaine & Hunt, Jennifer, 2009. "How Much Does Immigration Boost Innovation?," CEPR Discussion Papers 7116, C.E.P.R. Discussion Papers.
  3. Alejandro Justiniano & Giorgio E. Primiceri & Andrea Tambalotti, 2013. "Household Leveraging and Deleveraging," NBER Working Papers 18941, National Bureau of Economic Research, Inc.
  4. 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.
  5. Jean Imbs & Giovanni Favara, 2011. "Credit Supply and the Price of Housing," 2011 Meeting Papers 1342, Society for Economic Dynamics.
  6. Gonzalez, Libertad & Ortega, Francesc, 2009. "Immigration and Housing Booms: Evidence from Spain," IZA Discussion Papers 4333, Institute for the Study of Labor (IZA).
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  8. David Card, 1997. "Immigrant Inflows, Native Outflows, and the Local Labor Market Impacts of Higher Immigration," NBER Working Papers 5927, National Bureau of Economic Research, Inc.
  9. Ana Fostel & John Geanakoplos, 2011. "Tranching, CDS and Asset Prices: How Financial Innovation Can Cause Bubbles and Crashes," Cowles Foundation Discussion Papers 1809, Cowles Foundation for Research in Economics, Yale University.
  10. Balli, Hatice Ozer & Sorensen, Bent E., 2012. "Interaction effects in econometrics," MPRA Paper 38608, University Library of Munich, Germany.
  11. 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.
  12. 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.
  13. Saiz, Albert, 2007. "Immigration and housing rents in American cities," Journal of Urban Economics, Elsevier, vol. 61(2), pages 345-371, March.
  14. Bartel, Ann P, 1989. "Where Do the New U.S. Immigrants Live?," Journal of Labor Economics, University of Chicago Press, vol. 7(4), pages 371-91, October.
  15. Degen, Kathrin & Fischer, Andreas M, 2009. "Immigration and Swiss House Prices," CEPR Discussion Papers 7583, C.E.P.R. Discussion Papers.
  16. Kenneth N. Kuttner & Ilhyock Shim, 2013. "Can Non-Interest Rate Policies Stabilize Housing Markets? Evidence from a Panel of 57 Economies," NBER Working Papers 19723, National Bureau of Economic Research, Inc.
  17. Accetturo, Antonio & Manaresi, Francesco & Mocetti, Sauro & Olivieri, Elisabetta, 2014. "Don't stand so close to me: The urban impact of immigration," Regional Science and Urban Economics, Elsevier, vol. 45(C), pages 45-56.
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