“There’s no doubt that people with lower credit scores defaulted more but they weren’t driving up prices.”Ĭonklin’s team looked county by county at the percentage of loans issued to borrowers with credit scores under 660 across the U.S. “Our take is that the people with the low-credit scores don’t seem to be driving the housing boom,” Conklin said. Housing Boom.” The paper appeared in the July 2022 edition of the Journal of Financial Intermediation. Scott Frame, Kristopher Gerardi and Haoyang Liu, published their findings in “ Villians or scapegoats? The role of subprime borrowers in driving the U.S. That doesn’t seem to be the case.”Ĭonklin and his coauthors, Federal Reserve Bank economists W. “Then there was an inflow of easy credit and it allowed those people to push prices up to unsustainable levels. “I think a lot of people have the scenario in their head that there was this big pool of people with low credit scores who couldn’t buy before this time,” Conklin said. Subprime loans are loans given to borrowers who may have difficulty with repayment due to low credit scores and income. Rents have surged as would-be buyers face difficulties finding appropriate properties.James Conklin, an associate professor of real estate at UGA’s Terry College of Business, wanted to test a common perception about the crisis - that the prevalence of subprime loans led to unwarranted and unsustainable housing values. Prices are 6% higher than a year ago, supported by a structural shortage of housing amid increasing post-pandemic demand. □□ #London’s housing market is in overvalued territory. But Paris remains the least affordable Eurozone market in the study. □□ #Paris Nominal property prices stagnated between mid-2021 and mid-2022 and consequently, the French capital has abandoned the bubble risk territory. #Frankfurt & #Munich exhibit the biggest risks of a housing bubble among the Eurozone markets covered in this report. □□German cities have seen property prices more than double in nominal terms over the last decade, though current growth has cooled to around 5% between mid-2021 and mid-2022 from double-digit levels. It continues to trail more affordable tax-friendly cities and states. #NewYork, on the contrary, exhibited the weakest price growth since mid-2021 of all US cities analyzed. #Boston benefited from the highest #income growth of all cities in the study on the back of its strong and diverse economy. #LA, imbalances were already high and have increased further since last year with unaffordability reaching near all-time peaks.
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