TY  - JOUR
AU  - Vigdor,Jacob L.
TI  - Liquidity Constraints and Housing Prices: Theory and Evidence from the VA Mortgage
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10611
PY  - 2004
Y2  - July 2004
UR  - http://www.nber.org/papers/w10611
L1  - http://www.nber.org/papers/w10611.pdf
N1  - Author contact info:
Jacob L. Vigdor
Sanford School of Public Policy
Box 90245
Duke University
Durham, NC 27708
Tel: 919/613-9226
Fax: 919/681-8288
E-Mail: jacob.vigdor@duke.edu
AB  - This paper employs a simple intertemporal model to show that presence of liquidity constraints can depress the price of a durable good below its net present rental value, regardless of the overall supply elasticity. The existence of price effects implies that the relaxation of liquidity constraints is not Pareto improving, and may in fact be regressive. Historical evidence, which exploits the fact that a clearly identifiable group, war veterans, enjoyed the most favored access to mortgage credit in the postwar era, supports the model. The results suggest that more recent mortgage market innovations have served primarily to increase prices rather than home ownership rates, and that such innovations have the potential to exacerbate socioeconomic disparities in ownership rates.
ER  -