Yongjia (Eddy) Li, an assistant professor in the Department of Finance, presented his paper “Home price appreciation and residential lending standards” at the Southern Financial Association’s virtual annual meeting. The paper has since been published in the Journal of Economics and Business.
Li co-authored the paper with Salman Tahsin from San Jose State University. The paper explores the effect of home price appreciation on residential lending standards in the U.S. across different sample periods.
The authors found that rising home prices led to higher loan acceptance rates during the housing boom. However, home price appreciation is associated with tighter lending standards post-crisis, suggesting that banks took a more cautious view of home price appreciation after the crisis. Their findings show that it was the small banks who lowered loan acceptance rates in measurement systems analyses with higher home price appreciation, which caused the overall loan acceptance rates to decline in post-crisis periods.