House Price Appreciation: The Impact Of No Income Verification Loans And Investor Activity

Abstract

This paper examines house price appreciation in the US from 2004 through 2009, a period marked by a boom-and-bust cycle for house prices, to investigate the impact of the extensive use of no income verification loans and investor activity on house price movements.  House price appreciation for each state and Washington, DC is modeled in cross-sectional time series regressions using macroeconomic variables and loan type intensities.  The findings suggest that widespread use of no income verification loans and non-owner occupied loans directly impacts house price movements and significantly explains the astonishing gains and sudden losses that occurred during the sample period.