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|Title:||Low mortgage rates and securitization: A distinct perspective on the U.S. housing boom|
|Keywords:||House price to rent ratio;Dynamic Gordon growth model;State space model;Particle filter;JEL Classification: C22, E44|
|Citation:||The Scandinavian Journal of Economics|
|Abstract:||This paper analyses the impacts of low interest rates and lax underwriting standards on the U.S. housing boom around the beginning of the new millennium. We suggest a timevarying mean of the log price to rent ratio (PtR) to capture the persistent changes in housing prices. We show that the increasing latent trend in the PtR was significantly affected by the increased securitization of residential mortgage loans and decreasing interest rates, with the former effect being about three times larger than the latter. In absence of securitization, negative interest rates would have been needed to reproduce an equally large housing boom since 2003.|
|Appears in Collections:||Dept of Economics and Finance Research Papers|
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