American Economic Review: Insights
ISSN 2640-205X (Print) | ISSN 2640-2068 (Online)
The Missing Loan-to-Value Cycle
American Economic Review: Insights
(pp. 409–26)
Abstract
We show that the equilibrium loan-to-value (LTV) distribution in the US mortgage market has been remarkably stable over the last quarter century, both in aggregate and region by region, despite large, cross-sectionally heterogeneous house price cycles. While high-LTV mortgages changed from being explicitly government backed to privately securitized and back, their overall fraction remained unchanged. A repeat-sales methodology and an analysis of loan performance confirm that this stability in the distribution of LTVs holds even within subgroups of the population. These findings are inconsistent with models of credit cycles that use changes in collateral constraints to generate boom-and-bust dynamics in house prices.Citation
Adelino, Manuel, W. Ben McCartney, and Antoinette Schoar. 2026. "The Missing Loan-to-Value Cycle." American Economic Review: Insights 8 (3): 409–26. DOI: 10.1257/aeri.20250173Additional Materials
JEL Classification
- C43 Index Numbers and Aggregation; leading indicators
- E32 Business Fluctuations; Cycles
- G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
- 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