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The housing cycle: what role for mortgage market development and housing finance?

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journal contribution
posted on 15.05.2019, 10:30 by Luca Agnello, Vitor CastroVitor Castro, Ricardo M. Sousa
We use duration analysis to assess the impact of securitization, mortgage sector liberalization and government involvement in housing finance on the length of housing booms, busts and normal times in a panel of 20 OECD countries over the period 1970Q1-2015Q4. Our results reveal that a move towards a more liberalized mortgage sector is associated with longer housing booms, while an increase in securitization is linked with shorter housing busts. They also show that the length of housing booms and busts is particularly sensitive to housing finance characteristics, but that does not seem to be the case for normal times. Additionally, government support measures do not necessarily cushion against housing busts. A careful assessment of their distributional impact, as well as their effect on the trade-off between liquidity and guarantee/loan provision, is also required to prevent (longer) housing booms. All in all, housing finance regulation may prove especially relevant to shield against the damaging effects of housing busts and the financial stability risks associated with housing booms. Monetary policy can also be an important complement to macro-prudential policies. Finally, government participation in housing finance should be designed in a way that avoids an undesirable amplification of house price fluctuations.

Funding

National Funds of the FCT - Portuguese Foundation for Science and Technology within the project "UID/ECO/03182/2019".

History

School

  • Business and Economics

Department

  • Economics

Published in

Journal of Real Estate Finance and Economics

Volume

61

Issue

4

Pages

607 - 670

Citation

AGNELLO, L., CASTRO, V. and SOUSA, R.M., 2020. The housing cycle: what role for mortgage market development and housing finance? Journal of Real Estate Finance and Economics, 61 (4), pp.607-670.

Publisher

Springer Verlag © The Authors

Version

VoR (Version of Record)

Publisher statement

This work is made available according to the conditions of the Creative Commons Attribution 4.0 International (CC BY 4.0) licence. Full details of this licence are available at: http://creativecommons.org/licenses/by/4.0/

Acceptance date

07/05/2019

Publication date

2019-06-15

Notes

This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made.

ISSN

0895-5638

eISSN

1573-045X

Language

en