IDEAS home Printed from https://ideas.repec.org/a/bpj/bejmac/v11y2011i1n29.html
   My bibliography  Save this article

House Price Growth, Collateral Constraints and the Accumulation of Homeowner Debt in the United States

Author

Listed:
  • Disney Richard

    (University of Nottingham)

  • Gathergood John

    (University of Nottingham)

Abstract

Using household panel data, we present evidence on the relationship between house price growth and household indebtedness among homeowners in the United States for the period 1999 to 2007. We posit an underlying mechanism whereby rising housing wealth allows households to increase their collateralised borrowing. Over the period, we find that roughly one-fifth of the growth in indebtedness among U.S. households can be explained by rising house prices. This housing wealth–indebtedness link is stronger among the minority of households that were initially “collateral constrained.”

Suggested Citation

  • Disney Richard & Gathergood John, 2011. "House Price Growth, Collateral Constraints and the Accumulation of Homeowner Debt in the United States," The B.E. Journal of Macroeconomics, De Gruyter, vol. 11(1), pages 1-30, September.
    • Handle: RePEc:bpj:bejmac:v:11:y:2011:i:1:n:29
    DOI: 10.2202/1935-1690.2229
    as

    Download full text from publisher

    File URL: https://doi.org/10.2202/1935-1690.2229
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.
    File URL: https://libkey.io/10.2202/1935-1690.2229?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
    2. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
    3. Buiter, Willem H., 2010. "Housing wealth isn't wealth," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 4, pages 1-29.
    4. Ortalo-Magne, Francois & Rady, Sven, 2004. "Housing transactions and macroeconomic fluctuations: a case study of England and Wales," Journal of Housing Economics, Elsevier, vol. 13(4), pages 287-303, December.
    5. Richard Disney & Sarah Bridges & John Gathergood, 2010. "House Price Shocks and Household Indebtedness in the United Kingdom," Economica, London School of Economics and Political Science, vol. 77(307), pages 472-496, July.
    6. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
    7. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 124(4), pages 1449-1496.
    8. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    9. Atif Mian & Amir Sufi & Francesco Trebbi, 2010. "The Political Economy of the US Mortgage Default Crisis," American Economic Review, American Economic Association, vol. 100(5), pages 1967-1998, December.
    10. Ortalo-Magne, Francois & Rady, Sven, 2004. "Housing Transactions and Macroeconomic Fluctuations: A Case Study of England," 2004 Meeting Papers 207c, Society for Economic Dynamics.
    11. Richard Disney & John Gathergood & Andrew Henley, 2010. "House Price Shocks, Negative Equity, and Household Consumption in the United Kingdom," Journal of the European Economic Association, MIT Press, vol. 8(6), pages 1179-1207, December.
    12. Orazio P. Attanasio & Laura Blow & Robert Hamilton & Andrew Leicester, 2009. "Booms and Busts: Consumption, House Prices and Expectations," Economica, London School of Economics and Political Science, vol. 76(301), pages 20-50, February.
    13. Engelhardt, Gary V., 1996. "House prices and home owner saving behavior," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 313-336, June.
    14. Jeremy C. Stein, 1995. "Prices and Trading Volume in the Housing Market: A Model with Down-Payment Effects," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 110(2), pages 379-406.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nur Hafidzah Idris* & Melissa Faisal Wee & Shafinar Ismail & Khairunnisa Abd Samad, 2018. "Financial Knowledge, Debt Literacy and Over-Indebtedness," The Journal of Social Sciences Research, Academic Research Publishing Group, pages 22-29:3.
    2. Pancrazi, Roberto & Pietrunti, Mario, 2019. "Natural expectations and home equity extraction," Journal of Housing Economics, Elsevier, vol. 46(C).
    3. Henrik Yde Andersen & Søren Leth-Petersen, 2021. "Housing Wealth or Collateral: How Home Value Shocks Drive Home Equity Extraction and Spending," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 403-440.
    4. Chao He & Randall Wright & Yu Zhu, 2015. "Housing and Liquidity," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 18(3), pages 435-455, July.
    5. Sheng Guo, 2022. "What Did Homeowners Do with Home Equity Borrowing? Contemporaneous and Long‐Term Effects," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 54(8), pages 2445-2475, December.
    6. Neil Bhutta & Benjamin J. Keys, 2016. "Interest Rates and Equity Extraction during the Housing Boom," American Economic Review, American Economic Association, vol. 106(7), pages 1742-1774, July.
    7. Kartashova, Katya & Tomlin, Ben, 2017. "House prices, consumption and the role of non-Mortgage debt," Journal of Banking & Finance, Elsevier, vol. 83(C), pages 121-134.
    8. Lingxiao Li & Bing Zhu, 2020. "Housing Wealth, Consumption Channels and Mortgage Liberalization," International Real Estate Review, Global Social Science Institute, vol. 23(4), pages 433-465.
    9. Richard Disney & John Gathergood, 2018. "House Prices, Wealth Effects and Labour Supply," Economica, London School of Economics and Political Science, vol. 85(339), pages 449-478, July.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Piazzesi, M. & Schneider, M., 2016. "Housing and Macroeconomics," Handbook of Macroeconomics, in: J. B. Taylor & Harald Uhlig (ed.), Handbook of Macroeconomics, edition 1, volume 2, chapter 0, pages 1547-1640, Elsevier.
    2. Mairead Roiste & Apostolos Fasianos & Robert Kirkby & Fang Yao, 2021. "Are Housing Wealth Effects Asymmetric in Booms and Busts?," The Journal of Real Estate Finance and Economics, Springer, vol. 62(4), pages 578-628, May.
    3. Davis, Morris A. & Van Nieuwerburgh, Stijn, 2015. "Housing, Finance, and the Macroeconomy," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 753-811, Elsevier.
    4. Ebner, André, 2013. "A micro view on home equity withdrawal and its determinants: Evidence from Dutch households," Journal of Housing Economics, Elsevier, vol. 22(4), pages 321-337.
    5. Suari-Andreu, Eduard, 2021. "Housing and household consumption: An investigation of the wealth and collateral effects," Journal of Housing Economics, Elsevier, vol. 54(C).
    6. William Elming & Andreas Ermler, 2016. "Housing equity, saving and debt dynamics over the Great Recession," IFS Working Papers W16/12, Institute for Fiscal Studies.
    7. Aditya Aladangady, 2014. "Homeowner Balance Sheets and Monetary Policy," Finance and Economics Discussion Series 2014-98, Board of Governors of the Federal Reserve System (U.S.).
    8. Marianne Bertrand & Adair Morse, 2016. "Trickle-Down Consumption," The Review of Economics and Statistics, MIT Press, vol. 98(5), pages 863-879, December.
    9. Yong Tu & Seow Ong & Ying Han, 2009. "Turnovers and Housing Price Dynamics: Evidence from Singapore Condominium Market," The Journal of Real Estate Finance and Economics, Springer, vol. 38(3), pages 254-274, April.
    10. Atif Mian & Amir Sufi, 2014. "House Price Gains and U.S. Household Spending from 2002 to 2006," NBER Working Papers 20152, National Bureau of Economic Research, Inc.
    11. Kukk, Merike, 2016. "How did household indebtedness hamper consumption during the recession? Evidence from micro data," Journal of Comparative Economics, Elsevier, vol. 44(3), pages 764-786.
    12. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-2156, August.
    13. Ghysels, Eric & Plazzi, Alberto & Valkanov, Rossen & Torous, Walter, 2013. "Forecasting Real Estate Prices," Handbook of Economic Forecasting, in: G. Elliott & C. Granger & A. Timmermann (ed.), Handbook of Economic Forecasting, edition 1, volume 2, chapter 0, pages 509-580, Elsevier.
    14. Neil Bhutta & Benjamin J. Keys, 2016. "Interest Rates and Equity Extraction during the Housing Boom," American Economic Review, American Economic Association, vol. 106(7), pages 1742-1774, July.
    15. Lee, Seungyoon, 2023. "House prices, homeownership, and household consumption: Evidence from household panel data in Korea," Economic Modelling, Elsevier, vol. 126(C).
    16. Nyakabawo, Wendy & Miller, Stephen M. & Balcilar, Mehmet & Das, Sonali & Gupta, Rangan, 2015. "Temporal causality between house prices and output in the US: A bootstrap rolling-window approach," The North American Journal of Economics and Finance, Elsevier, vol. 33(C), pages 55-73.
    17. Atalay, Kadir & Edwards, Rebecca, 2022. "House prices, housing wealth and financial well-being," Journal of Urban Economics, Elsevier, vol. 129(C).
    18. Mi Diao & Yi Fan & Tien Foo Sing, 2018. "Demand restrictions; government interventions; resale public housing market; private housing market; housing wealth," ERES eres2018_32, European Real Estate Society (ERES).
    19. Nan-Kuang Chen & Charles Leung, 2008. "Asset Price Spillover, Collateral and Crises: with an Application to Property Market Policy," The Journal of Real Estate Finance and Economics, Springer, vol. 37(4), pages 351-385, November.
    20. Christelis, Dimitris & Georgarakos, Dimitris & Jappelli, Tullio, 2015. "Wealth shocks, unemployment shocks and consumption in the wake of the Great Recession," Journal of Monetary Economics, Elsevier, vol. 72(C), pages 21-41.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejmac:v:11:y:2011:i:1:n:29. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Peter Golla (email available below). General contact details of provider: https://www.degruyter.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.