In the U.S. economy during the past 25 years, house prices exhibit fluctuations considerably larger than house rents, and these large fluctuations tend to move together with business cycles. We build a simple theoretical model to characterize these observations by showing the tight connection...

"I test the credit-market effects of housing wealth shocks by estimating the consumption elasticity of house price shocks among households in different age quintiles. Younger households face faster expected income growth and hence would like to borrow more than older households. I estimate...

We study how a household borrowing constraint in the form of a down payment requirement affects house price dynamics in an OLG model with standard preferences. We find that in certain situations the borrowing constraint shapes house price dynamics substantially. The importance of the constraint...

I study how firm internal capital markets spread local housing shocks across geographically separate regions. I analyze this question in the context of the home builder industry during the 2006-09 housing crisis. I show that home builders who experience large asset write downs in one area,...