Year: 2025
Type: article
Abstract: This paper investigates the relationship between house prices and mortgage defaults in recourse and non-recourse US metropolitan areas. The theoretical analysis shows that shocks to house price returns have a stronger effect on defaults in non-recourse markets than in recourse markets due to strategic default behaviour. Empirical evidence from a panel vector autoregressive (Panel VAR) model supports this prediction and, in addition, reveals a stronger house price response to defaults in non-recourse markets than predicted by the theoretical model. The findings highlight key differences in mortgage default dynamics across recourse and non-recourse markets, offering insights for households, lenders, policymakers and regulators.
Source: Regional Studies
Authors: Damian S. Damianov, Xiangdong Wang, Cheng Yan
Language: English
Topic: Housing Market and Economics
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: hybrid
Funders: Durham University, Department of Finance
OpenAlex ID: W4414418953