NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Sheng Cheng Hu

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NBER Working Papers and Publications

June 1982The Economics of Mortgage Terminations: Implications for Mortgage Lenders and Mortgage Terms
with Patric H. Hendershott, Kevin E. Villani: w0918
The paper begins with the development of models explaining the mortgage refinancing and assumption decisions of households Having identified the economic variables influencing these decisions, we then simulate the models for different values to determine under what conditions households will refinance or assume. Finally, we draw some implications of these results for: (1) the impact of a decline in mortgage rates on the asset portfolio yields of mortgage lending institutions and (2) the effect of the observed rise in interest rate volatility, including the optimal terminations response of mortgage borrowers, on the terms of the mortgage contract and the returns to mortgage lenders on recently issued mortgage loans.

Published: Hendershott, Patric H., Sheng Hu, and Kevin E. Villani. "The Economics of Mortgage Terminations: Implications for Mortgage Lender and Mortgage Terms."Housing Finance Review, Vol. 2, No. 2. (April 1983), pp. 127-142.

September 1981Accelerating Inflation, Nonassumable Fixed-Rate Mortgages, and Consumer Choice and Welfare
with Patric H. Hendershott: w0755
This paper measures the impact of nonassumable, fixed-rate, long-term mortgage financing on household mobility and housing demand during a period of accelerating inflation (l965_71l). We calculate that typical households who bought houses during the l96l7l period and utilized this type of financing would not have moved until the 1975-77 period. And this is in spite of rising incomes and a sharp fail in the real rental price or user cost of housing. We conclude that the nonassumable, fixed-rate mortgage is largely responsible for bath sluggish housing demand in the l967-79 period and its surge in the 1976-79 period. Housing activity would have been far more stable had variable-rate mortgagee been employed. Finally, the enormous gap between current mortgage rates and those existing in the197...

Published: Hendershott, Patric H. and Hu, Sheng Cheng. "Accelerating Inflation, Nonassumable Fixed-Rate Mortgages, and Consumer Choice and Welfare." Public Finance Quarterly, Vol. 10, No. 2, (April 1982).

July 1981The Allocation of Capital Between Residential and Nonresidential Uses: Taxes, Inflation and Capital Market Constraints
with Patric H. Hendershott: w0718
We have constructed a simple two-sector model of the demand for housing and corporate capital. An increase in the inflation rate, with and with- out an increase in the risk premium on equities, was then simulated with a number of model variants. The model and simulation experiments illustrate both the tax bias in favor of housing (its initial average real user cost was 3 percentage points less than that for corporate capital) and the manner in which inflation magnifies it (the difference rises to 5 percentage points without an exogenous increase in real house prices and 4 percentage points with an exogenous increase). The existence of a capital-market constraint offsets the increase in the bias against corporate capital, but it introduces a sharp, inefficient reallocation of housing from l...

Published: Hendershott, Patric H. and Sheng Cheng Hu. "The Allocation of Capital Between Residential and Nonresidential Uses: Taxes, Inflattion and Capital Market Constraints." The Journal of Finance, Vol. 38, No. 3, (June 1983), pp. 7 95-812. citation courtesy of

August 1979Inflation and the Benefits from Owner-Occupied Housing
with Patric H. Hendershott: w0383
This paper examines the effects of inflation on the allocation of resources between residential and nonresidential uses and the productivity of capital in the U.S. We begin by calculating the realized rates of return on homeowner equity and the contributions of fixed-rate mortgages and differences in relative inflation rates to extraordinary earned real returns. The paper then focuses on the implications of the extraordinary real returns on residential capital for stock prices and on the demand for owner-occupied housing. Proposals for achieving efficient allocation of capital between residential and nonresidential uses are also considered.

Published: Hendershott, Patric H. and Hu, Sheng Cheng. "Inflation and Extraordinary Returns on Owner-Occupied Housing: Some Implications for Capital Allocation and Productivity Growth." Journal of Macroeconomics, Vol. 3, No. 2, (Spring 1981), pp. 177-203.

 
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