NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Dynamics of Housing Debt in the Recent Boom and Great Recession

Manuel Adelino, Antoinette Schoar, Felipe Severino

NBER Working Paper No. 23502
Issued in June 2017
NBER Program(s):   AP   CF

This paper documents a number of key facts about the evolution of mortgage debt, homeownership, debt burden and subsequent delinquency during the recent housing boom and Great Recession. We show that the mortgage expansion was shared across the entire income distribution, i.e. the flow and stock of debt rose across all income groups (except for the top 5%). The mortgage expansion was especially pronounced in areas with increased house prices, and the speed at which houses turned over (churn) in these areas went up significantly. However, the average loan-to-value ratios (LTV) at origination did not increase over the boom period. While homeownership rates increased for the middle and upper income households, there was no increase in homeownership for the lowest income groups. Finally, default rates post-crisis went up predominantly in areas with large house price drops, especially for high income and high-FICO borrowers. These results are consistent with a view that the run up in mortgage debt over the pre-crisis period was driven by rising home values and expectations of increasing prices.

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Document Object Identifier (DOI): 10.3386/w23502

Forthcoming: Dynamics of Housing Debt in the Recent Boom and Great Recession, Manuel Adelino, Antoinette Schoar, Felipe Severino. in NBER Macroeconomics Annual 2017, volume 32, Eichenbaum and Parker. 2017

 
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