This paper develops a DSGE framework featuring a heterogeneous housing market, endogenousdefault, and a banking sector. We find that the idiosyncratic mortgage risk shock plays an importantrole in explaining the fluctuations of house prices during the mid-1980s and the years leading up tothe...

This paper develops a theoretical and empirical framework to assess the heterogeneous effects of mortgage rates on housing returns when accounting for the zero lower bound regime of the policy interest rate and state-level supply and demand conditions. Based on an interacted panel VAR estimated...