"This paper characterizes the labor supply and borrowing of a household facing collateral requirements that limit its … debt and compel it to accumulate equity in its durable goods stock. The household's discount rate exceeds the market rate … constraints generate a positive comovement between the household's debt, the stock of durable goods and labor supply following …

for between one fourth and one third of the increase in U.S. house prices and household debt that preceded the financial …