Essays On Housing Markets And Mortgage Finance
My dissertation focuses on the functioning of the housing and mortgage markets. In the chapter Housing Search and Rental Market Intermediation, I examine the brokerage behaviors in the rental housing market. I use a listing data set to show how a broker’s agent size affects rental outcomes, with larger brokers associated with lower rents and shorter listing time. The dispersion cannot be fully explained by the amenity difference and points to a sizable agent impact. I build a directed search model of tenants, landlords and brokers that features a broker's listing capacity constraint. The smaller rent premiums from larger brokers reflect the capacity benefit of coordinating tenant search better. I evaluate the impacts of two rental policies. First, whether a lower barrier of entry to the brokerage sector benefits tenants in rental search. Second, I evaluate the impact of shifting the commission liability to landlords, central to the recent New York rental market reform. In the chapter Mortgage Risk Premiums During the Housing Bubble, I examine why mortgage risk premiums in the housing boom before the Great Recession failed to reflect the growth of risky loans. I use a loan-origination data set to examine the risk pricing. The observed decrease in the mortgage spread is due to the refinanced loans and is attributed to the shift to the non-traditional mortgages. Moreover, hard information including credit score and loan-to-value ratio becomes less sensitive in the risk pricing. In a related chapter Housing Boom, Mortgage Default and Agency Friction, I use a dynamic general equilibrium model of borrowers, depositors and intermediaries to quantify what contributes to the boom-bust dynamics. I model the lending condition and the mortgage risk as the aggregate shocks to generate the time-varying liquidity and default premiums in the mortgage spread. The model shows that relaxing the constraints of mortgage lenders, instead of borrowers, can explain the increasing mortgage credit and the decreasing mortgage spread in the boom episode.