Working Papers

The Missing Home Buyers: Regional Heterogeneity and Credit Contractions (Job Market Paper)

Abstract: This paper studies how delayed home ownership from young buyers affects the transmission of shocks to housing markets. Using a panel of U.S. metro areas, I show that mortgage originations to young buyers have decreased more in regions with higher house prices over the past 15 years, despite credit standards changing mostly nationally. I develop and calibrate a regional business cycle model of the cross-section of housing markets consistent with these facts. Young buyers have more debt, and credit constraints bind more in high-price regions. Therefore an aggregate tightening of loan-to-value and payment-to-income requirements generates heterogeneous local responses in home ownership and prices. This mechanism explains 86% of the cross-sectional differences in originations and 50% of the differences in house price declines in 2007-12. Regional heterogeneity dampens the effect of subsidies like the First-Time Homebuyer Credit, because they fail to stimulate high-price regions which suffer the largest busts. Credit relaxation policies achieve larger stimulus and welfare gains.

Affordable Housing and City Welfare, with Jack Favilukis and Stijn Van Nieuwerburgh (NBER Working Paper 25906)

Revise & Resubmit, Review of Economic Studies

Media: VoxEU, MarketWatch, Global Housing Watch, Ideas At Work, Gothamist, LA Times, NY Daily News, The Urbanist, NPR

Abstract: Housing affordability is the main policy challenge for many large cities in the world. Zoning changes, rent control, housing vouchers, and tax credits are the main levers employed by policy makers. But how effective are they at combating the affordability crisis? We build a new framework to evaluate the effect of these policies on the well-being of its citizens. It endogenizes house prices, rents, construction, labor supply, output, income and wealth inequality, as well as the location decisions of households. Its main novel features are risk, risk aversion, and incomplete risk-sharing. We calibrate the model to the New York MSA, incorporating current zoning and affordable housing policies. Housing affordability policies carry substantial insurance value but cause misallocation in labor and housing markets. Housing affordability policies that enhance access to this insurance especially for the neediest households create large net welfare gains.

Aggregate Precautionary Savings Motives (Slides from SED 2019)

Abstract: This paper studies households' precautionary savings when they face macroeconomic shocks, a channel that complements the traditional microeconomic precautionary savings motive. I incorporate continuous aggregate income and credit supply shocks, two prominent sources of risk, into a heterogeneous households model calibrated to the U.S. economy. I then propose a novel solution method that quantifies how much the economy departs from certainty equivalence. The precautionary motive associated with credit supply risk is substantial. It depresses the equilibrium risk-free rate by one fourth as much as idiosyncratic income risk, and much more than aggregate income risk. In the long run, large movements in credit generate a low rate, low debt environment like the post-Great Recession period. They persistently, albeit mildly, depress consumption and employment, leading to higher estimates of the costs of business cycles. Over time, the model assigns about half of the volatility of consumption and the risk-free rate to credit supply shocks. When inverted to recover the sequence of structural shocks around the Great Recession, it suggests that households borrowing constraints have remained tight during the recovery, despite rising aggregate consumption.

Work in Progress

Credit Crises with Multidimensional Loan Contracts, with Olivier Wang

A Macroeconomic Model with Liquidity Constraints, with Virgiliu Midrigan

The Geography of Homeownership, with Donghoon Lee and Wilbert van der Klaauw


Internationalization versus Regionalization in the Emerging Stock Markets, with Virginie Coudert and Karine Herve, International Journal of Economics and Finance, Vol. 20(1), pp. 16-27, 2015