Advisory Center for Affordable Settlements & Housing

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Document Type General
Publish Date 23/01/2015
Author Updating by ACASH is in process
Published By National Bureau Of Economic Research
Edited By Tabassum Rahmani
Uncategorized

Changes In Buyer Composition And The Expansion Of Credit During The Boom

Earlier research has suggested that distortions in the supply of mortgage credit during the run-up to the 2008 financial crisis, in particular a decoupling of credit flow from income growth, may have been responsible for the rise in house prices and the subsequent collapse of the housing market. Focusing on individual mortgage transactions rather than whole zip codes, we show that the apparent decoupling of credit from income shown in previous research was driven by changes in buyer composition. In fact, the relationship between individual mortgage size and income growth during the housing boom was very similar to previous periods, independent of how we measure income.

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