This paper studies the joint transitional dynamics of the foreclosures and house prices in a
standard life‐cycle incomplete markets model with housing and a realistic long‐term
mortgage structure. We calibrate our model to match several long‐term features of the US
housing market, and analyze the effects of several unexpected and permanent shocks on
the house price and the foreclosure rate both across the steady states and along the
transition between the steady states. We examine permanent, unexpected shocks to the risk …

In this paper we study the joint transitional dynamics of the foreclosures and house prices in
a standard life-cycle incomplete markets model with housing and realistic longterm
mortgage structure. We calibrate our model to match several long term features of the US
housing market. Using the calibrated model, we study the effects of several unexpected and
permanent shocks on the house price and the foreclosure rate both across the steady-states
and along the transition between the steady-states. More specifically, we consider a risk-free …