Mortgage Flows And Commercial Property Price Cycles

摘要

In this article, we hypothesize that past real estate capital appreciation affects the mortgage supply, which is an important component of a positive feedback loop between mortgage supply and real estate values. This feedback loop is a potentially important driving force ofreal estate cycles; that is, in a booming (busting) market, positive (negative) changes in property values would increase (decrease) mortgage capital supply, which would further increase (decrease) property values. Using quarterly U.S. data on commercial real estate capital appreciation, mortgage fund flows, mortgage interest rates, and loan-to-value ratios from 1978 Q2 to 2008 Q4, we find strong evidence of the positive effect of past real estate value changes on the mortgage supply. These empirical findings highlight the important role of mortgage lending in real estate cycles.