Non-Recourse Mortgage and Housing Price Bubble, Burst and Recovery

24 Pages Posted: 19 May 2014

See all articles by Te Bao

Te Bao

Nanyang Technological University (NTU) - Division of Economics

Li Ding

University of Groningen - Faculty of Economics and Business

Date Written: May 17, 2014

Abstract

This paper investigates the impact of the non-recourse vs. recourse mortgage on the housing price dynamics in American major metropolitan areas (MSAs). We find strong evidence that non-recourse states experience faster price growth during the boom (2000 to 2006) as well as sharper price drop during the bust period (2006-2009). The result lends limited support to the notion that non-recourse states also experience faster price recovery in the rebound periods after the crisis (2009-2013). The volatility of housing price is larger in the non-recourse states than the recourse ones, in particular during the rebound period.

Keywords: non-recourse loan, mortgage, housing market, boom-bust cycles

JEL Classification: E44, G21, G28, K11, R20

Suggested Citation

Bao, Te and Ding, Li, Non-Recourse Mortgage and Housing Price Bubble, Burst and Recovery (May 17, 2014). Available at SSRN: https://ssrn.com/abstract=2438236 or http://dx.doi.org/10.2139/ssrn.2438236

Te Bao (Contact Author)

Nanyang Technological University (NTU) - Division of Economics ( email )

HSS 04-53, 14 Nanyang Drive
Singapore, 639798
Singapore

Li Ding

University of Groningen - Faculty of Economics and Business ( email )

Postbus 72
9700 AB Groningen
Netherlands

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