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Staff Working Papers
Working Paper 18-02: House Price Markups and Mortgage Defaults

Published: 03/28/2018

​Paul E. Carrillo, George Washington University; William M. Doerner, FHFA;​​​​​ William D. Larson, FHFA;

*Revised November 2021​


The transaction price of identical housing units can vary widely due to heterogeneity in buyer and seller preferences, matching, and search costs, generating what we term "markups" above or below the average market price. We measure markups for 3.4 million purchase-money mortgages and show they can predict mortgage defaults and credit losses conditional on default even after accounting for collateral coverage (loan-to-value ratio) and a comprehensive set of other covariates. The findings suggest standard collateral coverage estimation may be inaccurate, with implications for both individual and portfolio-level credit risk assessment.

This research was selected as the best paper in 2018 in real estate valuation by the American Real Estate Society.​ A revised version of this paper has undergone external peer-review and has been accepted for publication in an academic journal with open (free) access. Citation: Paul E. Carrillo, William M. Doerner, William D. Larson. 2023. "House Price Markups and Mortgage Defaults." Journal of Money, Credit and Banking, 55(4),​ 747-782.


File Attachments:
Working Paper 18-02