House price momentum and strategic complementarity

House prices exhibit substantially more momentum, positive autocorrelation in price changes, than existing theories can explain. I introduce an amplification mechanism to reconcile this discrepancy. Sellers do not set a unilaterally high or low list price because they face a concave demand curve: increasing the price of an above-average-priced house rapidly reduces its sale probability, but cutting the price of a below-average-priced house only slightly improves its sale probability. The resulting strategic complementarity amplifies frictions because sellers gradually adjust their price to stay near average. I provide empirical evidence for concave demand using a quantitative search model that amplifies momentum two- to threefold

How do foreclosures exacerbate housing downturns?

This article uses a structural model to show that foreclosures played a crucial role in exacerbating the recent housing bust and to analyse foreclosure mitigation policy. We consider a dynamic search model in which foreclosures freeze the market for non-foreclosures and reduce price and sales volume by eroding lender equity, destroying the credit of potential buyers, and making buyers more selective. These effects cause price-default spirals that amplify an initial shock and help the model fit both national and cross-sectional moments better than a model without foreclosure. When calibrated to the recent bust, the model reveals that the amplification generated by foreclosures is significant: ruined credit and choosey buyers account for 25.4% of the total decline in non-distressed prices and lender losses account for an additional 22.6%. For policy, we find that principal reduction is less cost-effective than lender equity injections or introducing a single seller that holds foreclosures off the market until demand rebounds. We also show that policies that slow down the pace of foreclosures can be counterproductive.Accepted manuscrip

Mortgage design in an equilibrium model of the housing market

How can mortgages be redesigned to reduce macrovolatility and default? We address this question using a quantitative equilibrium life‐cycle model. Designs with countercyclical payments outperform fixed payments. Among those, designs that front‐load payment reductions in recessions outperform those that spread relief over the full term. Front‐loading alleviates liquidity constraints when they bind most, reducing default and stimulating housing demand. To illustrate, a fixed‐rate mortgage (FRM) with an option to convert to adjustable‐rate mortgage, which front‐loads payment reductions relative to an FRM with an option to refinance underwater, reduces price and consumption declines six times as much and default three times as much.Funding Provided by NSF under grant "Mortgage Design in an Equilibrium Model of the Housing Market" (1623801 - National Science Foundation)Accepted manuscrip

Post-Operative Functional Outcomes in Early Age Onset Rectal Cancer

Background: Impairment of bowel, urogenital and fertility-related function in patients treated for rectal cancer is common. While the rate of rectal cancer in the young (<50 years) is rising, there is little data on functional outcomes in this group. Methods: The REACCT international collaborative database was reviewed and data on eligible patients analysed. Inclusion criteria comprised patients with a histologically confirmed rectal cancer, <50 years of age at time of diagnosis and with documented follow-up including functional outcomes. Results: A total of 1428 (n=1428) patients met the eligibility criteria and were included in the final analysis. Metastatic disease was present at diagnosis in 13%. Of these, 40% received neoadjuvant therapy and 50% adjuvant chemotherapy. The incidence of post-operative major morbidity was 10%. A defunctioning stoma was placed for 621 patients (43%); 534 of these proceeded to elective restoration of bowel continuity. The median follow-up time was 42 months. Of this cohort, a total of 415 (29%) reported persistent impairment of functional outcomes, the most frequent of which was bowel dysfunction (16%), followed by bladder dysfunction (7%), sexual dysfunction (4.5%) and infertility (1%). Conclusion: A substantial proportion of patients with early-onset rectal cancer who undergo surgery report persistent impairment of functional status. Patients should be involved in the discussion regarding their treatment options and potential impact on quality of life. Functional outcomes should be routinely recorded as part of follow up alongside oncological parameters

We thank the National Science Foundation for financial support. We also thank SECEX/MEDIC and

Ricardo Markwald at FUNCEX Rio de Janeiro for sharing firm trade data. We are very grateful t