TY - JOUR
T1 - Alternative Mortgage Instruments, Qualification Constraints and the Demand for Housing
T2 - An Empirical Analysis
AU - Phillips, Richard A.
AU - VanderHoff, James H.
PY - 1994/9
Y1 - 1994/9
N2 - Government‐guaranteed mortgage loans (GFRMs) and adjustable‐rate mortgages (ARMs) were introduced to make payment to income (PTI) and loan‐to‐value (LTV) qualification conventions less restrictive. This paper analyzes the effect of GFRMs and ARMs on the demand for housing. Using a large national data set for the 1988 to 1989 period, we employ a two‐stage procedure to estimate housing demand. in the first stage, a multinomial logit model estimates the probability of choosing an FRM, ARM or GFRM. Predicted values from the logit are used to construct user costs and estimate housing demand. Using the model estimates, we simulate demand under four different mortgage availability regimes: FRM, FRM and GFRM, FRM and ARM and all three. These simulations indicate that GFRMs, by relaxing LTV constraints, increase housing demand by approximately 6.2% relative to the FRM regime; the addition of ARMs, by relaxing both PTI and LTV constraints, raises demand by an additional 6%, for a total of 12.2% with inclusion of all alternatives.
AB - Government‐guaranteed mortgage loans (GFRMs) and adjustable‐rate mortgages (ARMs) were introduced to make payment to income (PTI) and loan‐to‐value (LTV) qualification conventions less restrictive. This paper analyzes the effect of GFRMs and ARMs on the demand for housing. Using a large national data set for the 1988 to 1989 period, we employ a two‐stage procedure to estimate housing demand. in the first stage, a multinomial logit model estimates the probability of choosing an FRM, ARM or GFRM. Predicted values from the logit are used to construct user costs and estimate housing demand. Using the model estimates, we simulate demand under four different mortgage availability regimes: FRM, FRM and GFRM, FRM and ARM and all three. These simulations indicate that GFRMs, by relaxing LTV constraints, increase housing demand by approximately 6.2% relative to the FRM regime; the addition of ARMs, by relaxing both PTI and LTV constraints, raises demand by an additional 6%, for a total of 12.2% with inclusion of all alternatives.
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U2 - 10.1111/1540-6229.00643
DO - 10.1111/1540-6229.00643
M3 - Article
AN - SCOPUS:84977392332
SN - 1080-8620
VL - 22
SP - 453
EP - 477
JO - Real Estate Economics
JF - Real Estate Economics
IS - 3
ER -