Non-Recourse Mortgage and Housing Price Bubble, Burst and Recovery
24 Pages Posted: 19 May 2014
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
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