25 research outputs found
How Do House Prices Affect Consumption? Evidence From Micro Data
Housing is a major component of wealth. Since house prices fluctuate considerably over time, it is important to understand how these fluctuations affect households' consumption decisions. Rising house prices may stimulate consumption by increasing households' perceived wealth, or by relaxing borrowing constraints. This paper investigates the response of household consumption to house prices using UK micro data. We estimate the largest effect of house prices on consumption for older homeowners, and the smallest effect, insignificantly different from zero, for younger renters. This finding is consistent with heterogeneity in the wealth effect across these groups. In addition, we find that regional house prices affect regional consumption growth. Predictable changes in house prices are correlated with predictable changes in consumption, particularly for households that are more likely to be borrowing constrained, but this effect is driven by national rather than regional house prices and is important for renters as well as homeowners, suggesting that UK house prices are correlated with aggregate financial market conditions.
A Model of Mortgage Default
This paper solves a dynamic model of a household's decision to default on its mortgage, taking into account labor income, house price, inflation, and interest rate risk. Mortgage default is triggered by negative home equity, which results from declining house prices in a low inflation environment with large mortgage balances outstanding. Not all households with negative home equity default, however. The level of negative home equity that triggers default depends on the extent to which households are borrowing constrained. High loan-to-value ratios at mortgage origination increase the probability of negative home equity. High loan-to-income ratios also increase the probability of default by tightening borrowing constraints. Comparing mortgage types, adjustable-rate mortgage defaults occur when nominal interest rates increase and are substantially affected by idiosyncratic shocks to labor income. Fixed-rate mortgages default when interest rates and inflation are low, and create a higher probability of a default wave with a large number of defaults. Interest-only mortgages trade off an increased probability of negative home equity against a relaxation of borrowing constraints, but overall have the highest probability of a default wave.
The Long-Baseline Neutrino Experiment: Exploring Fundamental Symmetries of the Universe
The preponderance of matter over antimatter in the early Universe, the
dynamics of the supernova bursts that produced the heavy elements necessary for
life and whether protons eventually decay --- these mysteries at the forefront
of particle physics and astrophysics are key to understanding the early
evolution of our Universe, its current state and its eventual fate. The
Long-Baseline Neutrino Experiment (LBNE) represents an extensively developed
plan for a world-class experiment dedicated to addressing these questions. LBNE
is conceived around three central components: (1) a new, high-intensity
neutrino source generated from a megawatt-class proton accelerator at Fermi
National Accelerator Laboratory, (2) a near neutrino detector just downstream
of the source, and (3) a massive liquid argon time-projection chamber deployed
as a far detector deep underground at the Sanford Underground Research
Facility. This facility, located at the site of the former Homestake Mine in
Lead, South Dakota, is approximately 1,300 km from the neutrino source at
Fermilab -- a distance (baseline) that delivers optimal sensitivity to neutrino
charge-parity symmetry violation and mass ordering effects. This ambitious yet
cost-effective design incorporates scalability and flexibility and can
accommodate a variety of upgrades and contributions. With its exceptional
combination of experimental configuration, technical capabilities, and
potential for transformative discoveries, LBNE promises to be a vital facility
for the field of particle physics worldwide, providing physicists from around
the globe with opportunities to collaborate in a twenty to thirty year program
of exciting science. In this document we provide a comprehensive overview of
LBNE's scientific objectives, its place in the landscape of neutrino physics
worldwide, the technologies it will incorporate and the capabilities it will
possess.Comment: Major update of previous version. This is the reference document for
LBNE science program and current status. Chapters 1, 3, and 9 provide a
comprehensive overview of LBNE's scientific objectives, its place in the
landscape of neutrino physics worldwide, the technologies it will incorporate
and the capabilities it will possess. 288 pages, 116 figure
A model of mortgage default : [Version Februar 2014]
This paper solves a dynamic model of households' mortgage decisions incorporating labor income, house price, inflation, and interest rate risk. It uses a zero-profit condition for mortgage lenders to solve for equilibrium mortgage rates given borrower characteristics and optimal decisions. The model quantifies the effects of adjustable vs. fixed mortgage rates, loan-to-value ratios, and mortgage affordability measures on mortgage premia and default. Heterogeneity in borrowers' labor income risk is important for explaining the higher default rates on adjustable-rate mortgages during the recent US housing downturn, and the variation in mortgage premia with the level of interest rates