Re-Examining the Price Effects of Assumption Financing: The Case of Above-Market Interest Rates

Posted: 1 Jul 1998

See all articles by Marcus T. Allen

Marcus T. Allen

Florida Atlantic University - Finance & Real Estate

Thomas M. Springer

Florida Atlantic University - Department of Finance & Real Estate

Date Written: March 1996

Abstract

Although previous research addresses the price effects of below-market loan assumptions in housing transactions, no evidence exists regarding the price effects of above-market loan assumptions. This study develops a hypothesis of strictly non-negative price effects in assumption financing and empirically documents a positive impact in housing transactions involving above-market loan assumptions. Based on a switching regimes regression analysis of 2594 single-family house transactions, we find evidence of a significant price premium in moderately priced homes involving above-market loan assumptions, but no evidence for a financing premium for more expensive homes. The results suggest that the source of the premium in the moderately priced home market is the assuming buyer's desire to avoid lenders' qualification criteria.

JEL Classification: G12

Suggested Citation

Allen, Marcus Tillman and Springer, Thomas M., Re-Examining the Price Effects of Assumption Financing: The Case of Above-Market Interest Rates (March 1996). Available at SSRN: https://ssrn.com/abstract=9046

Marcus Tillman Allen (Contact Author)

Florida Atlantic University - Finance & Real Estate ( email )

2912 College Ave
Davie, FL 33314
United States
954-236-1063 (Phone)
954-236-1298 (Fax)

Thomas M. Springer

Florida Atlantic University - Department of Finance & Real Estate ( email )

5353 Parkside Drive
Jupiter, FL 33458
United States
561-297-2914 (Phone)
561-297-3686 (Fax)

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