National Bureau of Economic Research · 1995 · 16 citations · 0 references
BusinessEconomicsReal EstateReal Estate EconomicsReal Estate FinanceReal Estate ValuationHousing MarketsMortgage MarketsReal Estate MarketsReal Estate Portfolio AnalysisReal Estate Portfolio ManagementReal Estate RiskAutoregressive Distributed Lag ModelsEquity Index FuturesMortgage RiskReal Estate Price EffectsReal Estate Price VolatilityResidential Mortgage LendingResidential Property PricesStock Index Futures
Evidence is shown, using US foreclosure data by state 1975-93, that periods of high default rates on home mortgages strongly tend to follow real estate price declines or interruptions in real estate price increase. The relation between price decline and foreclosure rates is modelled using a distributed lag. Using this model, holders of residential mortgage portfolios could hedge some of the risk of default by taking positions in futures or options markets for residential real estate prices, were such markets to be established.