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Research

​Research

 

Our economists conduct research on a range of topics in housing finance, including analyzing data and uncovering emerging trends.  In addition to presenting their research to policy makers, they share their research at academic conferences and publish in journals and other scholarly outlets.  Our work enables those interested in housing finance to make decisions based on the best information available.

In particular, our researchers focused on housing trends in house prices, housing market conditions, and mortgage lending activity.  In addition, we analyze the risk and capital adequacy of the housing government-sponsored enterprises and publish papers aimed at improving public understanding of the mortgage finance system.

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 Papers

 

 

Working Paper 24-03: The Lock-In Effect of Rising Mortgage Rates44869<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Ab​stract&#58;</h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">People can be “locked-in” or constrained in their ability to make appropriate financial changes, such as being unable to move homes, change jobs, sell stocks, rebalance portfolios, shift financial accounts, adjust insurance policies, transfer investment profits, or inherit wealth. These frictions—whether institutional, legislative, personal, or market-driven—are often overlooked. Residential real estate exemplifies this challenge with its physical immobility, high transaction costs, and concentrated wealth. In the United States, nearly all 50 million active mortgages have fixed rates, and most have interest rates far below prevailing market rates, creating a disincentive to sell. This paper finds that for every percentage point that market mortgage rates exceed the origination interest rate, the probability of sale is decreased by 18.1%. This mortgage rate lock-in led to a 57% reduction in home sales with fixed-rate mortgages in 2023Q4 and prevented 1.33 million sales between 2022Q2 and 2023Q4. The supply reduction increased home prices by 5.7%, outweighing the direct impact of elevated rates, which decreased prices by 3.3%. These findings underscore how mortgage rate lock-in restricts mobility, results in people not living in homes they would prefer, inflates prices, and worsens affordability. Certain borrower groups with lower wealth accumulation are less able to strategically time their sales, worsening inequality.​</span></p><p>​<span style="line-height&#58;22px;">Mortgage lock-in data are available below in two formats at the bottom of this webpage. The first file offers a data supplement that could be used to recreate figures shown in the working paper. The second file offers additional developmental data aggregates produced from estimations in the working paper. Both files are subject to change with working paper revisions. Our <a href="/PolicyProgramsResearch/Research/PaperDocuments/wp2403-lock-in-FAQs.pdf">FA​Qs</a> address common questions about the datasets. Please cite this working paper when using either dataset.</span>​</p><ul class="FHFA-List"><li> <a href="/PolicyProgramsResearch/Research/PaperDocuments/wp2403-lock-in-figures.xlsx">Supplemental data​​ for figures</a> (1 MB)</li><li style="padding-bottom&#58;8px !important;">​​​ <a href="/PolicyProgramsResearch/Research/PaperDocuments/wp2403-lock-in-data.xlsx">Developmental data aggregates</a>​ (45 MB)​</li></ul>​ 3/18/2024 6:11:12 PMHome / Policy, Programs & Research / Research / Working Paper 24-03: The Lock-In Effect of Rising Mortgage Rates Ross M. Batzer, Jonah R. Coste, William M. Doerner, and Michael 5658https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 24-02: Measuring Homeownership Sustainability for First-Time Homebuyers44525<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Ab​stract&#58;</h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">Homeownership is often expressed as a simple static number. Most reports or studies are unable to track a homeowner over time and they cannot follow a person after a home is sold to see what happens next. We craft new and dynamic statistics based on first-time homebuyers (FTHBs) using a nationally representative panel. FTHBs tend to remain homeowners through time. Additionally, we follow them through the mortgage market to describe their experiences with subsequent mortgages, including other purchase mortgages and refinances. We provide statistics about three measures of homeownership “sustainability”&#58; current homeownership, time until first exit from homeownership, and cumulative time since first purchase that individuals have remained owners. Across all three measures, we see that most homebuyers remain homeowners and the persistence has increased over time across all homeowner demographics like race or ethnicity, regions of the country, and mortgage lending submarkets.​​</span></p>​​​​<br>3/13/2024 6:00:07 PMHome / Policy, Programs & Research / Research / Working Paper 24-02: Measuring Homeownership Sustainability for First-Time Homebuyers Kevin A. Park (Fannie Mae); Liyi Liu 1534https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 24-01: Capitalization of Property Tax Incentives: Evidence From Philadelphia43773<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Ab​stract&#58;</h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">In 2000, Philadelphia enacted an abatement policy that exempted new development from property taxes for 10 years. This policy provides an ideal natural experiment to test property tax capitalization because it creates contemporaneous intra-jurisdiction tax variation within a finite and known duration. Consistent with theory, the tax benefits are initially capitalized fully into home prices. However, as abatements near expiration, the benefits become overcapitalized in home prices. This paper also finds that escrow payment shocks cause delinquencies for owners of homes with expiring abatements.​</span></p>​​​​<br>1/8/2024 2:04:01 PMHome / Policy, Programs & Research / Research / Working Paper 24-01: Capitalization of Property Tax Incentives: Evidence From Philadelphia This policy provides an ideal natural 851https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 23-07: Mortgage Debt and the Response to Fiscal Transfers42768<p>*Revised March 2024</p><h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;0px !important;">​​​Ab​stract&#58;​<br></h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">This paper studies how mortgage debt shapes the consumption response to cash transfers using an incomplete markets model with housing and long-term debt. Among homeowners, the model predicts those with mortgage debt have an average spending response six times larger than those without debt, and higher levels of leverage are associated with larger increases in spending. Responses in the model are found to be poorly correlated with income. By excluding homeowners with debt, conditioning transfers on having low income substantially reduces their efficacy in increasing aggregate spending. The opposite is predicted by a standard model of consumer spending without mortgages.​</span></p>​​​​<br>3/12/2024 9:10:30 PMHome / Policy, Programs & Research / Research / Working Paper 23-07: Mortgage Debt and the Response to Fiscal Transfers This paper studies how mortgage debt shapes the 1097https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 23-06: Valuing Public Transit: The L-Train Shutdown43442<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Ab​stract&#58;</h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">In this paper, I quantify the value of access to public transit in New York using the surprise, hurricane-related announcement of the temporary shutdown of an important piece of transportation infrastructure&#58; the L-train connecting Brooklyn and Manhattan. My approach allows me to measure changes in housing sales prices by using a change in public transit infrastructure that is (a) temporary, and (b) not an outcome of city transit planning, but rather an unexpected consequence of a natural disaster. I find that the L-train’s shutdown announcement caused a temporary decrease in sales prices for affected housing units of 6.4 percent. This estimate suggests a monthly capitalization rate of public transit access of around $863 for housing units where the L-train is the nearest subway stop, demonstrating that households in New York City ascribe a high value to transit access. Using these estimates, the benefits of the repair outweigh the costs, with the benefit-to-cost ratio of the repairs ranging from 2.76 to 2.78.​</span></p>​​<br>10/11/2023 2:00:47 PMHome / Policy, Programs & Research / Research / Working Paper 23-06: Valuing Public Transit: The L-Train Shutdown In this paper, I quantify the value of access to public transit 1792https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 23-05: When Climate Meets Real Estate: A Survey of the Literature40666<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Ab​stract&#58;</h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">In this paper, we survey a growing body of academic research at the intersection of climate risks, housing, and mortgage markets, with a focus on the United States. With near unanimity, climate scientists project disasters to increase in frequency, severity, and geographic scope over the next century. While natural hazards, such as hurricanes, riverine flooding, and wildfires have historically posed risks to regional housing markets, the systemic risk that climate change may pose to housing and mortgage markets is of increasing concern. To understand the components of systemic climate risk, we survey existing work relating physical and transition risks to mortgage and housing markets, including both single-family and multifamily segments. Our review of physical risks addresses price, loan performance, and migratory effects stemming from flooding, wildfires, and sea level rise. In surveying transition risks, we discuss papers on energy use and decarbonization as they relate to real estate. Where possible, we explain how these topics may intersect with housing affordability and sustainability, especially for historically disadvantaged communities. We conclude by drawing attention to critical areas for research into flood and other climate-related perils likely to pose significant challenges for real estate in the coming century.​​</span></p> ​​<br>8/16/2023 5:28:28 PMHome / Policy, Programs & Research / Research / Working Paper 23-05: When Climate Meets Real Estate: A Survey of the Literature Justin Contat; Carrie Hopkins; Luis Mejia 3682https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 23-04: How Do Students Value an Elite Education? Evidence on Residential Location and Applications to NYC Specialized Schools47019<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Abstract&#58;</h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">Are students willing to endure long commutes for access to good schools? Using New York City Department of Education administrative data matched with Google transit directions, we find that longer commutes from home markedly deter students from applying to even the most elite high schools. For the top public school in New York State, a student with a 20 minute commute is 74% more likely to apply than one who lives 40 minutes away. For two other schools above the 99th percentile of performance, the differences are 234% and 137%. We also find that eighth grade exam scores relate to how well students understand the admissions process. As far as we are aware, we are the first to have the required location precision to track specific commutes for individual high school students. From a policy perspective, our findings imply that – while ​expanded school choice may be desirable – housing access near good schools is quite important.</span></p> ​<br>7/26/2023 8:25:27 PMHome / Policy, Programs & Research / Research / Working Paper 23-04: How Do Students Value an Elite Education Lawrence Costa (FHFA); JJ Naddeo (Georgetown University 6005https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 23-03: The Credit Supply Channel of Monetary Policy Tightening and its Distributional Impacts40350<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Abstract&#58;</h4><p style="font-style&#58;normal;"> </p><p>This paper studies how tightening monetary policy transmits to the economy through the mortgage market and sheds new light on the distributional consequences at both individual and regional levels. We find that credit supply factors, specifically restrictions on the debt-to-income (DTI) ratio, account for most of the decline in mortgages. These effects are even more pronounced for minority and middle-income borrowers, who find themselves excluded from the credit market. Additionally, regions with historically high DTI ratios exhibit greater reductions in mortgage originations, house prices, and consumption.​<br></p>11/29/2023 6:14:12 PMJoshua Bosshardt (FHFA); Marco Di Maggio (Harvard University); Ali Kakhbod (University of California, Berkeley); ​Amir Kermani (University of California, Berkeley 3009https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 23-02: Geographic Disaggregation of House Price Stress Paths: Implications for Single-Family Credit Risk Measurement42711<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Abstract&#58;</h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">We explore the impact of geographic disaggregation of house price stress paths on single-family credit risk measurement. Specifically, we focus on the value added of moving from national, to state-level, to core-based statistical area (CBSA)-level house price paths on estimates of mortgage credit related stress losses. To ensure the robustness of our results, we estimate losses across two different loan portfolios and three credit models. We find that CBSA-level paths provide additional insight on localized credit risk and can be reliably constructed using quarterly house price indices. Further, the variation in results across credit models suggests an implicit confidence interval around any one stress loss estimate. Accounting for this uncertainty through a model risk add-on could potentially offer a more conservative view of portfolio credit risk.​</span></p><p>A revised version of this paper has been accepted for publication and is forthcoming at the <em>Journal of Fixed Income</em>.​<br></p>9/18/2023 8:27:10 PMHome / Policy, Programs & Research / Research / Working Paper 23-02: Geographic Disaggregation of House Price Stress Paths: Implications for Single-Family Credit Risk 2608https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx
Working Paper 23-01: The Value of Intermediaries for GSE Loans38796<h4 style="font-size&#58;13px;font-style&#58;normal;padding-top&#58;8px !important;">​​Abstract&#58;</h4><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">​We analyze the costs and benefits of financial intermediaries on access to credit using confidential regulatory data on mortgages securitized by the government-sponsored enterprises (GSEs). We find evidence of lenders pricing for observable and unobservable default risk independently from the GSEs. We explain these findings using a model of competitive mortgage lending with screening in which lenders acquire information beyond the GSEs’ underwriting criteria and retain a positive loss given default. The model shows that the discretionary behavior of lenders, relative to a counterfactual in which lenders passively implement the GSEs’ underwriting requirements and price competitively, benefits some borrowers with high observable risk at the expense of the majority of borrowers. Finally, the model suggests that the observed differences between banks and nonbanks are more consistent with ​differences in their expected loss given default rather than screening quality.​</span></p><p style="font-style&#58;normal;"> <span style="line-height&#58;22px;">Josh Bosshardt, a Senior Economist in FHFA's Division of Research and Statistics, discusses how he and external collaborators, Ali Kakhbod and Amir Kermani, find evidence that mortgage lenders independently screen for default risk in the attached working paper and <a href="/Videos/Pages/FHFA-Working-Paper-Value-of-Intermediaries-for-GSE-Loans.aspx">this YouTube video</a>.​</span></p> <p style="margin-top&#58;20px !important;"> <em>Page Updated&#58; July 3, 2023</em></p>7/3/2023 8:35:31 PMHome / Policy, Programs & Research / Research / Working Paper 23-01: The Value of Intermediaries for GSE Loans Joshua Bosshardt (FHFA);​ Ali Kakhbod (University of California 4150https://www.fhfa.gov/PolicyProgramsResearch/Research/Pages/Forms/AllItems.aspxhtmlFalseaspx

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