An Empirical Analysis of Metropolitan Housing and Mortgage Markets

This article provides the results of our first-step analysis of mortgage lending patterns for various policy-relevant geographic areas (such as central cities and areas with high concentrations of minority populations) and borrower groups (such as low-income and/or minority households). First, we present empirical evidence on how local housing and mortgage market conditions affect origination levels of various mortgage products. Second, we outline research issues central to evaluating policy and program options for enhancing access to mortgage credit by all groups of home buyers. Our econometric analysis suggests that distinct factors influence the origination of different types of loans. The origination of Federal Housing Administration loans shows high positive correlation with such demographic factors as household mobility and the proportion of minority populations. Origination of conforming conventional loans is affected mainly by housing supply factors, while that of jumbo loans is significantly affected by median household income. The results of canonical correlation analysis are consistent with our regression results. For further research questions to be pursued for better understanding the allocation patterns of mortgage credit, we discuss both macro analyses for defining underserved geographical areas and micro analyses for housing and mortgage choice patterns of households.