Fernando V. Ferreira

Housing Busts and Household Mobility

Using two decades of American Housing Survey data from 1985 to 2005, we estimate the influence of negative home equity and rising mortgage interest rates on household mobility. We find that both factors lead to lower, not higher, mobility rates over time. The effects are economically large -- mobility is almost 50 percent lower for owners with negative equity in their homes. This finding does not imply that current concerns over defaults and homeowners having to relocate are entirely misplaced. It does indicate that, in the past, the mortgage lock-in effects of these two factors were dominant over time. Policymakers may wish to begin considering the consequences of mortgage lock-in and reduced household mobility because they are quite different from the consequences associated with default and higher mobility.

Housing Busts and Household Mobility: An Update

This paper provides updated estimates of the impact of three financial frictions - negative equity, mortgage lock-in, and property tax lock-in - on household mobility. We add the 2009 wave of the American Housing Survey (AHS) to our sample and also create an improved measure of permanent moves in response to Schulhofer-Wohls (2011) critique of our earlier work (Ferreira, Gyourko and Tracy (2010)). Our updated estimates corroborate our previous results: negative equity reduces household mobility by 30 percent, and

Pop Internationalism: Has Half a Century of World Music Trade Displaced Local Culture?

1,000 of additional mortgage or property tax costs reduces household mobility by 10%-16%. Schulhofer-Wohls finding of a slight positive correlation between mobility and negative equity appears due to a large fraction of false positives, as his coding methodology has the propensity to misclassify almost half of the additional moves it identifies relative to our measure of permanent moves. This also makes his mobility measure dynamically inconsistent, as many transitions originally classified as a move are reclassified as a non-move when additional AHS panels become available. We conclude with directions for future research, including potential improvements to measures of household mobility.

Do School Entry Laws Affect Educational Attainment and Labor Market Outcomes

Advances in communication technologies over the past half century have made the cultural goods of one country more readily available to consumers in another, raising concerns that cultural products from large economies - in particular the US - will displace the indigenous cultural products of smaller economies. In this paper we provide stylized facts about the global music consumption and trade since 1960, using a unique data on popular music charts from 22 countries, corresponding to over 98% of the global music market. We find that trade volumes are higher between countries that are geographically closer and between those that share a language. Contrary to growing fears about large- country dominance, trade shares are roughly proportional to country GDP shares; and relative to GDP, the US music share is substantially below the shares of other smaller countries. We find a substantial bias toward domestic music which has, perhaps surprisingly, increased sharply in the past decade. We find no evidence that new communications channels - such as the growth of country-specific MTV channels and Internet penetration - reduce the consumption of domestic music. National policies aimed at preventing the death of local culture, such as radio airplay quotas, may explain part of the increasing consumption of local music.

The Role of Price Spillovers in the American Housing Boom

Age based school entry laws force parents and educators to consider an important tradeoff: Though students who are the youngest in their school cohort typically have poorer academic performance, on average, they have slightly higher educational attainment. In this paper we document that for a large cohort of California and Texas natives the school entry laws increased educational attainment of students who enter school early, but also lowered their academic performance while in school. However, we find no evidence that the age at which children enter school effects job market outcomes, such as wages or the probability of employment. This suggests that the net effect on adult labor market outcomes of the increased educational attainment and poorer academic performance is close to zero.

What Drives Racial and Ethnic Differences in High Cost Mortgages? The Role of High Risk Lenders

One of the striking features of the last U.S. housing boom was the heterogeneity in the timing of its onset across local markets. In this paper, we exploit this heterogeneity to estimate the extent to which the boom was spread via spatial spillovers from one market to another. Our analysis focuses on spillovers that occur around the time that a local market enters its boom, which we identify using sharp structural breaks in house price growth rates. On the extensive margin, there is evidence that the likelihood of a market booming increases substantially if nearby neighbors boom. On the intensive margin, we also find statistically significant but economically modest effects of the size of a neighbor’s boom on subsequent price growth in nearby markets. These affects appear to be unrelated to local market fundamentals, suggesting a potential role for non-rational factors.

Housing busts and household mobility

This paper examines racial and ethnic differences in high cost mortgage lending in seven diverse metropolitan areas from 2004-2007. Even after controlling for credit score and other key risk factors, African-American and Hispanic home buyers are 105 and 78 percent more likely to have high cost mortgages for home purchases. The increased incidence of high cost mortgages is attributable to both sorting across lenders (60-65 percent) and differential treatment of equally qualified borrowers by lenders (35-40 percent). The vast majority of the racial and ethnic differences across lender can be explained by a single measure of the lender’s foreclosure risk and most of the within-lender differences are concentrated at high-risk lenders. Thus, differential exposure to high-risk lenders combined with the differential treatment by these lenders explains almost all of the racial and ethnic differences in high cost mortgage borrowing.