The Impact of Housing Markets on Consumer Debt: Credit Report Evidence from 1999 to 2012

We investigate the impact of large swings in the housing market on nonmortgage borrowing, using CoreLogic geographic house price variation and Equifax-sourced FRBNY Consumer Credit Panel data for 1999 to 2012. First-differenced instrumental variables (FD-IV) estimates indicate that all homeowner typ...

Full description

Saved in:
Bibliographic Details
Published in:Policy File 2013
Main Authors: Brown, Meta, Stein, Sarah, Zafar, Basit
Format: Report
Language:English
Subjects:
Banking/Finance
Federal Reserve Bank of New York
Online Access:Request full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:We investigate the impact of large swings in the housing market on nonmortgage borrowing, using CoreLogic geographic house price variation and Equifax-sourced FRBNY Consumer Credit Panel data for 1999 to 2012. First-differenced instrumental variables (FD-IV) estimates indicate that all homeowner types increased both housing and nonhousing debt in response to the housing boom. However, older and prime homeowners responded to house price changes by reallocating obligations between home equity and credit card debt, with little change in total debt, during both the comparatively stable 1999-2001 period and the 2007-12 downturn. Younger and marginally creditworthy homeowners' nonmortgage debts moved with house prices during both expansions and downturns. These results suggest meaningful wealth effects of the housing market on consumption only for the boom period, but collateral effects throughout. A difference-indifferences estimation approach yields similar results. Finally, despite broad speculation, we find little substitution out of home equity debt into student loans in response to recent house price declines.