American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Do Credit Conditions Move House Prices?
American Economic Review
(pp. 3559–96)
(Complimentary)
Abstract
Did credit drive the 2000s housing cycle? The existing literature's findings range from credit having no effect to credit explaining most of the cycle. We show that these disparate results hinge on the extent to which landlords absorb credit-driven demand, which depends on the degree of housing market segmentation. We develop a model that nests cases between the extremes of no segmentation and perfect segmentation typically considered, estimate an elasticity that pins down the degree of segmentation, and use it to calibrate our model. We find credit standards played an important role, explaining 32 percent to 53 percent of the boom.Citation
Greenwald, Daniel L., and Adam Guren. 2025. "Do Credit Conditions Move House Prices?" American Economic Review 115 (10): 3559–96. DOI: 10.1257/aer.20211715Additional Materials
JEL Classification
- E32 Business Fluctuations; Cycles
- E44 Financial Markets and the Macroeconomy
- G51 Household Finance: Household Saving, Borrowing, Debt, and Wealth
- R21 Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand
- R31 Housing Supply and Markets