How do house prices respond to mortgage supply?

In this paper published in the Journal of Economic Geography, Guglielmo Barone, (professor at the Department of Economics and Management "Marco Fanno" of the University of Padova), Francesco David, Guido de Blasio and Sauro Mocetti (Bank of Italy), examine the impact of household mortgages on house prices.

Their results indicate that mortgages have a positive and significant causal effect on house prices, with an estimated elasticity of around 0.1. The estimated effect is larger during the expansionary phase of the housing cycle. The authors find evidence of significant spatial heterogeneity: mortgages push real estate values more in cities where the housing supply curve is less elastic or households are more dependent on external finance.

Read the full article here:

https://bit.ly/paper_GuglielmoBarone