TY  - JOUR
AU  - Goetzmann,William N.
AU  - Peng,Liang
AU  - Yen,Jacqueline
TI  - The Subprime Crisis and House Price Appreciation
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 15334
PY  - 2009
Y2  - September 2009
UR  - http://www.nber.org/papers/w15334
L1  - http://www.nber.org/papers/w15334.pdf
N1  - Author contact info:
William N. Goetzmann
School of Management
Yale University
Box 208200
New Haven, CT 06520-8200
Tel: 203/432-5950
Fax: 203/432-3003
E-Mail: william.goetzmann@yale.edu

Liang Peng
University of Colorado at Boulder 
419 UCB
Boulder, CO 80309-419
E-Mail: liang.peng@colorado.edu

Jacqueline Yen
Yale School of Management 
135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
E-Mail: Jacqueline.yen@yale.edu
AB  - This paper argues that econometric analysis of housing price indexes before 2006 generated forecasts of future long-term price growth and low estimated probabilities of extreme price decreases. These forecasts of future increases in home-loan collateral values may have affected both the demand and the supply of mortgages. Standard time series models using repeat-sales indices suggested that positive trends had a long half-life. Expectations based on such models supported expectations that could lead to an asset bubble. 

Analysis of data from the HMDA loan data base and LoanPerformance.com at the MSA level and at the loan level substantiates both supply and demand effects of past price trends in housing markets, particularly with respect to subprime mortgage applications and approvals. At the MSA level, past home price increases are associated with higher subprime applications and loan to value ratios. Approval probability of subprime loans was not affected by higher loan to value ratios. At the loan level, the approval probability of subprime applications is also positively associated with past home price appreciation. These results differ for prime mortgages.
ER  -