Problems for a Fundamental Theory of House Prices by Andreas Hornstein
Many people presume that financial innovations over the last 30 years that have made it easier for households to borrow against the collateral value of their homes have increased the demand for housing and, as a result, house prices. But in the latest issue of the Federal Reserve Bank of Richmond’s Economic Quarterly, Richmond Fed economist Andreas Hornstein argues that changes in collateral constraints have not significantly affected aggregate house prices. Instead, rates of house appreciation are likely to be determined by the basic supply and demand structure of the housing market.
You can find the full text of this article and others in the latest issue of Economic Quarterly.
Also in the Winter 2009 issue:
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