Question A:
Having the government-sponsored housing agencies Fannie Mae and Freddie Mac buy $200 billion in mortgage-backed securities would reduce mortgage rates by more than 25 basis points.
Responses
Responses weighted by each expert's confidence
Question B:
Having the government-sponsored housing agencies Fannie Mae and Freddie Mac buy $200 billion in mortgage-backed securities would measurably improve the affordability of home ownership.
Responses
Responses weighted by each expert's confidence
Question C:
Restrictions on large institutional investors buying single-family homes would measurably improve the affordability of home ownership.
Responses
Responses weighted by each expert's confidence
Question A Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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 Viral Acharya |
NYU Stern | Bio/Vote History | ||
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Market failure for housing affordability is for first-time buyers not getting enough supply from potential sellers who are locked in at low mortgage rates. Better to address these two ends of the market directly. Coarse measures: GSE support, institutional restrictions won't work
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 John Campbell |
Harvard | Bio/Vote History | ||
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I think mortgage markets are liquid enough, in current financial conditions, that the impact on mortgage rates would be less than 25 basis points.
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 John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Fed QE purchases were much larger, hard to see 25bp permanent reduction even there. Where does the money come from? What is really the demand curve for mortgages vs. other securities?
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 Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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 Wenxin Du |
HBS | Bio/Vote History | ||
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 Darrell Duffie |
Stanford | Bio/Vote History | ||
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$200 billion is small relative to the size of the mortgage market, The price elasticity necessary to get a 25 bps effect seems unrealistic. See Krishnamurthy and Vissing-Jorgensen's BPEA paper.
-see background information here |
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 Eugene Fama |
Chicago Booth | Bio/Vote History | ||
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I don't know of any evidence on this point, so any estimate s just a guess.
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 Xavier Gabaix |
Harvard | Bio/Vote History | ||
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 Itay Goldstein |
UPenn Wharton | Did Not Answer | Bio/Vote History | |
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 John Graham |
Duke Fuqua | Bio/Vote History | ||
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 Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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It is a mistake to extrapolate the impact $1.25t purchase of agency MBS during QE1. Today, spreads to treasuries are not dislocated. A $0.2t purchase would likely have very little impact.
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 Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
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 Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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 Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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 Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Look at QE which was 40 bn per month with an open ended horizon, that generated 15 basis points
-see background information here |
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 Arvind Krishnamurthy |
Stanford GSB | Bio/Vote History | ||
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A one-off purchase of $200 billion is too small to have a permanent impact on mortgage rates. The evidence from both QE studies as well as studies of the mortgage market provide estimates of the impact of purchases, and outside of financial crisis periods, the impacts are small
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 Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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 Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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 Sydney Ludvigson |
NYU | Bio/Vote History | ||
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 Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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It would surely depend a lot on the market condition and the way the purchases are financed
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 Loretta Mester |
UPenn Wharton | Bio/Vote History | ||
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There was a short-term announcement effect. More significant effect has to address the limited supply of housing.
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 Tobias Moskowitz |
Yale School of Management | Did Not Answer | Bio/Vote History | |
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 Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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amount is too small to move yields by so much. Even if the price impact per $ was the same as MBS purchases during QE1 after the financial crisis, this wouldn't be enough to move yields by 25bp.
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 Dimitris Papanikolaou |
Northwestern Kellogg | Bio/Vote History | ||
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It depends on the slope of the demand curve for buying MBS. I do not know what is the size of the purchase needed to move spreads by 25bps.
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 Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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This purchase might lower interest rates over a month, but relative to the size of government liabilities, this is a trivial amount, and it might lead to a shorter duration of government debt and raise long rates in equilibrium through risk premia.
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 Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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 Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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 Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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 Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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 Paola Sapienza |
Hoover Institution Stanford | Did Not Answer | Bio/Vote History | |
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 Amit Seru |
Stanford GSB | Bio/Vote History | ||
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 Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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 Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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While it may do so temporarily, it probably will not have a longer term effect.
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 Jeremy Stein |
Harvard | Bio/Vote History | ||
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 Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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 David Thesmar |
MIT Sloan | Bio/Vote History | ||
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seems about right since it's about 2% of the amount outstanding, and conventional demand elasticities.
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 Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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A temporary reduction of 10-15 bps is possible, but the fixed income market is huge and reasonably flexible, so I don't expect a meaningful long-term effect
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 Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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A 25 bps move is large. And there is an offsetting GE effect pushing up the 10yr Treasury rate to the extent that the purchases fuel economic activity through the housing market.
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 Nancy Wallace |
Berkeley Haas | Bio/Vote History | ||
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The historical performance of large scale agency MBS (TBA) purchase from 2010 - 2022 (other than the first announcement in QE1 that did lead to a 100bp change, but was followed by a $1.2T intervention) has never produce such a large response to such a SMALL purchase.
-see background information here -see background information here -see background information here -see background information here |
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 Toni Whited |
UMich Ross School | Bio/Vote History | ||
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 Haoxiang Zhu |
MIT Sloan | Bio/Vote History | ||
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In the past, the Federal Reserve’s quantitative easing on agency MBS was for much larger quantities (over $1 trillion). $200 bn is not an large amount for the agency MBS market.
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Question B Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
|---|---|---|---|---|
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Viral Acharya |
NYU Stern | Bio/Vote History | ||
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GSE support works when it is carried out with forward guidance, not as a one off... it is too crude a measure to address the market failure due to low locked-in mortgage rates.
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John Campbell |
Harvard | Bio/Vote History | ||
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In equilibrium, any reduction in mortgage rates will tend to drive up house prices, benefiting sellers rather than buyers.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Even if you do lower interest rates, that just raises the house price. When the supply of houses is inelastic, giving people money to buy them just raises the price.
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Wenxin Du |
HBS | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Eugene Fama |
Chicago Booth | Bio/Vote History | ||
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Again lack of evidence is the issue.
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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This amount is too small.
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Itay Goldstein |
UPenn Wharton | Did Not Answer | Bio/Vote History | |
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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It is a mistake to just focus on mortgage rates. Even if rates went down (which I am skeptical about), housing prices could go up potentially making housing less affordable.
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Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Probably would lower mortgage rates for a bit by a few basis points.
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Arvind Krishnamurthy |
Stanford GSB | Bio/Vote History | ||
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It is a further step from MBS rates to home mortgage rates, and the impacts are likely to diminish even further.
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Seems even more uncertain given the general equilibrium response. If affordability is the policy aim, there are other more direct instruments
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Loretta Mester |
UPenn Wharton | Bio/Vote History | ||
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Program not large enough to have a longer-term effect.
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Tobias Moskowitz |
Yale School of Management | Did Not Answer | Bio/Vote History | |
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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To the extent there is a small effect on yields (see response to previous question), it's effect on affordability of homeownership would be at least partly offset by a rise in house prices due to higher demand.
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Dimitris Papanikolaou |
Northwestern Kellogg | Bio/Vote History | ||
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Unless housing supply increases, this will simply translate into higher house prices.
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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Housing costs are high because we are short on housing and people have the money to drive up house prices. Mortgage rates are set by bond investors in global markets trying to maximize inflation-adjusted returns and their views about future dollar inflation rates.
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Paola Sapienza |
Hoover Institution Stanford | Did Not Answer | Bio/Vote History | |
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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David Thesmar |
MIT Sloan | Bio/Vote History | ||
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ambiguous: it lowers the cost of borrowing, but will boost house prices
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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I'm interpreting measurably in the question as meaningfully. We can measure a $10 reduction in monthly payments but I don't think it is meaningful.
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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Lower mortgage rates fuel demand for housing, which in the absence of a meaningful housing supply response, get capitalized into higher house prices.
-see background information here |
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Nancy Wallace |
Berkeley Haas | Bio/Vote History | ||
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A very important response to the 2008 crisis was to REDUCE the GSE balance sheet holdings of MBS and mortgages. This was one of the mandates of the conservatorship??
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Haoxiang Zhu |
MIT Sloan | Bio/Vote History | ||
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MBS purchases can at best reduce the mortgage rate. A lower financing cost can increase house prices, which does not help affordability.
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Question C Participant Responses
| Participant | University | Vote | Confidence | Bio/Vote History |
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Viral Acharya |
NYU Stern | Bio/Vote History | ||
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There is a good reason for markets to be arranged around large institutions who could serve as valuable market makers. Without evidence that this is the problem, restricting institutional ownership could impair liquidity of housing transactions, adversely affecting affordability
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John Campbell |
Harvard | Bio/Vote History | ||
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It's possible that such a policy will drive down the prices of single-family houses (while also driving up rents). But in my view there is no good reason to impede the rental market for single-family housing in this way.
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John Cochrane |
Hoover Institution Stanford | Bio/Vote History | ||
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Institutional investors buy to rent. To people. And then resell. They also provide important liquidity when you want to sell a not so perfect house fast.
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Douglas Diamond |
Chicago Booth | Bio/Vote History | ||
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Wenxin Du |
HBS | Bio/Vote History | ||
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Darrell Duffie |
Stanford | Bio/Vote History | ||
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Eugene Fama |
Chicago Booth | Bio/Vote History | ||
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These investors build, or encourage it, as well a buy, so the policy so the policy would have a negative supply effect.
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Xavier Gabaix |
Harvard | Bio/Vote History | ||
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Itay Goldstein |
UPenn Wharton | Did Not Answer | Bio/Vote History | |
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John Graham |
Duke Fuqua | Bio/Vote History | ||
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Campbell R. Harvey |
Duke Fuqua | Bio/Vote History | ||
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First, these institutional buyers are a small part of the overall market (less than 4% of single family homes, the last time I looked). Second, it is important to consider the knock-on effects such as reduced liquidity, less future supply, impact on financing costs, ...
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Harrison Hong |
Columbia | Did Not Answer | Bio/Vote History | |
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Wei Jiang |
Emory Goizueta | Bio/Vote History | ||
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Steven Kaplan |
Chicago Booth | Bio/Vote History | ||
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Anil Kashyap |
Chicago Booth | Bio/Vote History | ||
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Arvind Krishnamurthy |
Stanford GSB | Bio/Vote History | ||
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There is some research on the topic, but not enough for me to be confident. The research indicates that in areas where individuals are credit constrained, there is a benefit to institutions purchasing home and rent to the individuals.
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Camelia Kuhnen |
UNC Kenan-Flagler | Bio/Vote History | ||
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Michelle Lowry |
Drexel LeBow | Bio/Vote History | ||
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Sydney Ludvigson |
NYU | Bio/Vote History | ||
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Matteo Maggiori |
Stanford GSB | Bio/Vote History | ||
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Loretta Mester |
UPenn Wharton | Bio/Vote History | ||
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In certain locations, institutional investors represent a sizable source of demand; but overall, they do not.
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Tobias Moskowitz |
Yale School of Management | Did Not Answer | Bio/Vote History | |
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Stefan Nagel |
Chicago Booth | Bio/Vote History | ||
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Perhaps in some specific areas where institutional investors are most active, but probably not measurably elsewhere.
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Dimitris Papanikolaou |
Northwestern Kellogg | Bio/Vote History | ||
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Institutional investors own fewer than 1 percent of family homes. Maybe there is some heterogeneity, but the overall effect should be small.
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Jonathan Parker |
MIT Sloan | Bio/Vote History | ||
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If institutional investors lower rents for nice single-family homes, some Americans will choose to rent instead of buying. Whether this lowers house prices, depends on how elastic is the rent-own decision for single family homes and how much rents might decline.
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Christine Parlour |
Berkeley Haas | Bio/Vote History | ||
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Thomas Philippon |
NYU Stern | Bio/Vote History | ||
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Manju Puri |
Duke Fuqua | Did Not Answer | Bio/Vote History | |
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Michael R. Roberts |
UPenn Wharton | Bio/Vote History | ||
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Paola Sapienza |
Hoover Institution Stanford | Did Not Answer | Bio/Vote History | |
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Amit Seru |
Stanford GSB | Bio/Vote History | ||
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Robert Stambaugh |
UPenn Wharton | Bio/Vote History | ||
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Laura Starks |
UT Austin McCombs | Bio/Vote History | ||
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Jeremy Stein |
Harvard | Bio/Vote History | ||
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Johannes Stroebel |
NYU Stern | Did Not Answer | Bio/Vote History | |
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David Thesmar |
MIT Sloan | Bio/Vote History | ||
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yes, but it would increase rents.
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Sheridan Titman |
UT Austin McCombs | Bio/Vote History | ||
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It could slightly bring down the cost of starter homes, but it would increase the cost of renting homes. Do we want to lower the cost of owning a home or the cost of living in a home?
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Stijn Van Nieuwerburgh |
Columbia Business School | Bio/Vote History | ||
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SFR ownership is small (3% of rental stock), with some exceptions (Atlanta, Charlotte, Phoenix), resulting is small effects. Directionally, restricting institutional SFR purchases worsens affordability for renters but improves it for potential homeowners.
-see background information here |
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Nancy Wallace |
Berkeley Haas | Bio/Vote History | ||
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The recent literature, other than sensational press reports, does not support this very negative effect of these purchases on overall housing costs. Instead, it reduces rents for large group of in surburban areas with good schools and very little rental supply!
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Toni Whited |
UMich Ross School | Bio/Vote History | ||
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Haoxiang Zhu |
MIT Sloan | Bio/Vote History | ||
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The housing affordability problem is fundamental due to a supply/demand imbalance. In the short run, a restriction on institutional ownership of single family homes takes some demand out of the market and gives young families a better chance to buy homes.
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