Household finance—the normative and positive study of how households use financial
markets to achieve their objectives—has gained a lot of attention over the past decade and …

In this paper, we solve a dynamic model of households' mortgage decisions incorporating
labor income, house price, inflation, and interest rate risk. Using a zero‐profit condition for …

This paper studies a quantitative general equilibrium model of housing. The model has two
key elements not previously considered in existing quantitative macro studies of housing …

Collateral constraints widely used in models of financial crises feature a pecuniary
externality: Agents do not internalize how borrowing decisions made in “good times” affect …

We quantify the effect of recourse on default and find that recourse affects default by
lowering the borrower's sensitivity to negative equity. At the mean value of the default option …

This paper uses new data from the PSID to quantify the relative importance of negative
equity versus ability to pay, in driving mortgage defaults between 2009 and 2013. These …

This paper uses an assignment model to understand the cross section of house prices within
a metro area. Movers' demand for housing is derived from a life-cycle problem with credit …

How much of the foreclosure crisis can be explained by the large number of high-leverage
mortgages originated during the housing boom? In our model, heterogeneous households …

This article explores the causes and consequences of cross-country variation in mortgage
market structure. It draws on insights from several fields: urban economics, asset pricing …

Mortgages are long-term loans with nominal payments. Consequently, in incomplete asset
markets, monetary policy can affect housing investment and the economy through the cost of …