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We explore a mostly undocumented but important dimension of the housing market crisis: the role played by real estate investors. Using unique credit-report data, we document large increases in the share of purchases, and subsequently delinquencies, by real estate investors. In states that experienced the largest housing booms and busts, at the peak of the market almost half of purchase mortgage originations were associated with investors. In part by apparently misreporting their intentions to occupy the property, investors took on more leverage, contributing to higher rates of default. Our findings have important implications for policies designed to address the consequences and recurrence of housing market bubbles. Key words: mortgages, leverageHaughwout, Lee, Tracy, van der Klaauw: Federal Reserve Bank of New York (e-mail: andrew.haughwout@ny.frb.org, donghoon.lee@ny.frb.org, joseph.tracy@ny.frb.org, wilbert.vanderklaauw@ny.frb.org). The authors have benefited from helpful comments and suggestions from participants at the April 2011 Housing Economics and Research Conference at the University of California, Los Angeles, and the 2011 Society for Economic Dynamics Conference in Belgium. The views expressed in this paper are those of the authors and do not necessarily reflect the position of the Federal Reserve Bank of New York or the Federal Reserve System. 1The U.S. economy is still recovering from the financial crisis that began in the fall of 2007.The collapse of house prices across many markets was a precipitating factor in the financial crisis and adverse feedback effects between financial markets and the real economy led to the most severe recession in the post-war period. Extraordinary interventions by fiscal and monetary authorities both in the U.S. and abroad were required in order to prevent a complete collapse of global markets and the potential onset of another great depression.Attention has shifted from containing the financial crisis to examining its causes and designing policies to limit both the likelihood and the severity of a similar crisis in the future. Given the central role that housing played as a catalyst to the crisis, it is important to better understand the determinants of the dynamics of house prices and of subsequent mortgage defaults over this recent cycle. While house prices were rising in many parts of the country over the period leading up to the crisis, these increases were particularly pronounced in four states -Arizona, California, Florida and Nevada (the "bubble" states). This rapid run-up and then crash in house prices exacted a terrible cost to homeowners, financial firms and to the economy. Current estimates are that around 23 percent of active mortgages are "under water" in that the balance on the mortgage exceeds the current value of the 2 California is a bit of an exception in that it appears that average house prices have stabilized at a level 50 percent higher than in 2000. As of 2010 Q4, nearly 2.8 million homes have gone through foreclosure, and another 2 m...

Using two decades of American Housing Survey data from 1985-2005, we estimate the impact on household mobility of owners having negative equity in their homes and of rising mortgage interest rates. We find that both lead to lower, not higher, mobility rates over time. The impacts are economically large, with mobility being almost 50 percent lower for owners with negative equity in their homes. This does not imply that current worries about defaults and owners having to move from their homes are entirely misplaced. It does indicate that, in the past, the lock-in effects of these two factors were dominant over time. Our results cannot simply be extrapolated to the future, but policy makers should begin to consider the consequences of lock-in and reduced household mobility because they are quite different from those associated with default and higher mobility.

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This paper examines matched point and density forecasts of inflation from the Survey of Professional Forecasters to analyze the relationships among expected inflation, disagreement, and uncertainty. We undertake the empirical analysis within a seemingly unrelated regression framework and derive measures of uncertainty using a decomposition proposed by Wallis (2004, 2005) and by drawing on the concept of entropy. The results offer little evidence that disagreement is a useful proxy for uncertainty and mixed evidence that increases in expected inflation are accompanied by heightened uncertainty. Conversely, we document a quantitatively and statistically significant positive association between disagreement and expected inflation. © 2010 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe use matched point and density forecasts of output growth and infl ation from the ECB Survey of Professional Forecasters to derive measures of forecast uncertainty, forecast dispersion, and forecast accuracy. We construct uncertainty measures from aggregate density functions as well as from individual histograms. The uncertainty measures display countercyclical behavior, and there is evidence of increased uncertainty for output growth and infl ation since 2007. The results also indicate that uncertainty displays a very weak relationship with forecast dispersion, corroborating the fi ndings of other recent studies indicating that disagreement is not a valid proxy for uncertainty. In addition, we fi nd no correspondence between movements in uncertainty and predictive accuracy, suggesting that time-varying conditional variance estimates may not provide a reliable proxy for uncertainty. Last, using a regression equation that can be interpreted as a (G)ARCH-M-type model, we fi nd limited evidence of linkages between uncertainty and levels of infl ation and output growth.

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Using two decades of American Housing Survey data from 1985 to 2007, we revisit the literature on lock-in effects and provide new estimates of the impacts of negative equity and rising interest rates on the mobility of owners. Both lead to substantially lower mobility rates. Owners suffering from negative equity are one-third less mobile, and every added $1000 in real annual mortgage costs lowers mobility by about 12%. Our results cannot simply be extrapolated to the future, but they do have potentially important implications for policy makers concerned about the consequences of the housing bust that began as our data series ended. In particular, they indicate that we need to begin considering the consequences of lock-in and reduced household mobility because they are quite different from those associated with default and higher mobility. , we estimate the impact on household mobility of owners having negative equity in their homes and of rising mortgage interest rates. We find that both lead to lower, not higher, mobility rates over time. The impacts are economically large, with mobility being almost 50 percent lower for owners with negative equity in their homes. This does not imply that current worries about defaults and owners having to move from their homes are entirely misplaced. It does indicate that, in the past, the lock-in effects of these two factors were dominant over time. Our results cannot simply be extrapolated to the future, but policy makers should begin to consider the consequences of lock-in and reduced household mobility because they are quite different from those associated with default and higher mobility.