- Regional Variation in Transaction Costs, Mortgage Rate Heterogeneity, and Mortgage Refinancing BehaviorKiefer, Leonard C.; Kiefer, Hua; Mayock, Tom (Elsevier, 2023)Recent work has demonstrated that the U.S. mortgage market is characterized by significant heterogeneity in the interest rates that are offered to borrowers as well as mortgage refinancing behavior. In this study we contribute to the mortgage heterogeneity literature by providing the first systematic analysis of regional differences in transaction costs in the mortgage market. Using the Uniform Closing Database—a unique repository of loan-level closing cost information—we demonstrate that there is a tremendous amount of regional variation in transaction costs in the mortgage market, most of which is driven by differences in local mortgage stamp taxes and recording fees. In the second part of our paper, we take up the question of how failing to account for such heterogeneity might affect studies of borrower behavior in the mortgage market. We do so through the lens of the failure-to-refinance literature on optimal refinancing activity. Accounting for rate and closing cost heterogeneity significantly reduces estimates of suboptimal refinancing behavior, particularly among borrowers with high-risk credit profiles and those living in states with high closing costs. Because regional variation in closing costs is driven by the state and municipal policies, our results suggest that local governments play a role in the pass through of monetary policy via the mortgage market that has not been previously documented. Our findings also provide a potential mechanism above and beyond the home equity channel that could explain regional variation in refinancing activity and consumer spending during recoveries.
- Property value effects of the Hemlock wooly adelgid infestation in New England, USALi, Xiaoshu; Boyle, Kevin J.; Preisser, Evan L.; Holmes, Thomas P.; Orwig, David (Elsevier, 2022-04)We investigate residential property-price effects of the spread of the Hemlock wooly adelgid infestation northward through central portions of Connecticut and Massachusetts, USA. We find that hemlock trees and the accompanying adelgid infestation within 0.1 km buffers of properties affect sale prices, but the results do not extend to buffers of 0.5 and 1.0 km's. Further, within the 0.1 km buffer, only the healthiest hemlock trees contribute positively to property values. We investigated the robustness of the results to three data interpolation methods, Kriging, Inverse Distance Weighting and Spline, and while there was some minor difference in outcomes the results are robust to these interpolation methods. Two property-price models were estimated, a traditional hedonic model with spatial fixed effects and a repeat sale model. The models provide substantially different property-price impacts and care needs to be taken when interpreting these estimates. Both approaches are limited but in different ways; the hedonic by potentially omitted variables and the repeat-sales by a limited number of observations. Our results provide some support for the repeat-sale model as the hedonic model with spatial fixed effects underperformed when both models were estimated using the same data.