Leverage and House-Price Dynamics in U.S. Cities

32 Pages Posted: 9 Feb 1999

See all articles by Owen A. Lamont

Owen A. Lamont

Harvard University - Department of Economics

Jeremy C. Stein

Harvard University - Department of Economics; National Bureau of Economic Research (NBER)

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Abstract

We use city-level data to analyze the relationship between homeowner borrowing patterns and house-price dynamics. Our principal finding is that in cities where a greater fraction of homeowners are highly leveraged--i.e., have high loan-to-value ratios--house prices react more sensitively to city-specific shocks, such as changes in per-capita income. This finding is consistent with recent theories which emphasize the role of borrowing in shaping the behavior of asset prices.

JEL Classification: G12, R21

Suggested Citation

Lamont, Owen A. and Stein, Jeremy C., Leverage and House-Price Dynamics in U.S. Cities. Available at SSRN: https://ssrn.com/abstract=147910 or http://dx.doi.org/10.2139/ssrn.147910

Owen A. Lamont (Contact Author)

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States

Jeremy C. Stein

Harvard University - Department of Economics ( email )

Littauer Center
Cambridge, MA 02138
United States
617-496-6455 (Phone)
617-496-7352 (Fax)

HOME PAGE: http://post.economics.harvard.edu/faculty/stein/stein.html

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