Essays on housing economics and real estate finance

This dissertation contains three chapters on topics in the field of housing economics and real estate finance. This first chapter examines the impact of mortgage credit supply contraction on the supply and pricing of rental housing in the wake of the 2008-2009 financial crisis. We provide estimates of (1) the size of mortgage credit supply shocks at the county-level across the United States; (2) the impact of mortgage credit supply shock on housing rents and housing supply. To estimate the size of the credit supply shock, we use non-parametric methods to identify lender specific supply-side shocks; we then use a shift-share approach to aggregate a measure of credit supply shock at county level. Using the county-level credit supply shock as instruments for changes in mortgage denial rates, we reveal that housing rents respond positively to the contraction of the mortgage supply. The impact on housing rents is heterogeneous among different income groups. Moreover, we also document that the contraction of the mortgage supply resulted in a decline in home sales, and increased the share of renter-occupied units. Moreover, households in the lowest income groups are most affected. The finding suggests that recent regulatory changes in mortgage lending may have unintended consequences, leading to reduced home ownership and increased rental housing prices for the lowest income households. The second chapter provides a comprehensive investigations into the heterogeneity of home improvement and maintenance activities that has not been well explored by literature. Using American Housing Survey data on home improvement and maintenance expenditure, we obtain the following empirical evidence: First, speculating buyers spend significantly higher amount on home improvement compared with non-speculating buyers, and are more likely to perform major improvement. Second, households spend significantly more following the home purchase rather than prior to resale. This could be attributed to search friction that prevent households from matching to the perfect home. Third, the spending of home improvement and maintenance exhibits considerable variation across housing segments. In addition, there is considerable regional variation. The third chapter studies housing demand inspired by the fact that housing’s relative price, share of expenditure, and “unaffordability” have all grown since 1970. We estimate housing demand using a novel compensated framework over space and an uncompensated framework over time. Our specifications pass tests imposed by rationality and household mobility. Housing demand is income and price inelastic, and appears to fall with household size. We provide a numerical non-homothetic constant elasticity of substitution utility function for improved quantitative modeling. An ideal cost-of-living index demonstrates that the poor have been disproportionately impacted by rising relative rents, which have greatly amplified increases in real income inequality.U of I OnlyAuthor requested U of Illinois access only (OA after 2yrs) in Vireo ETD syste