This paper quantitatively accounts for the cyclical dynamics of key macroeconomic housing and mortgage market variables … using a tractable, searchtheoretic model of housing with equilibrium mortgage default. To explain these dynamics, the model … constraints. During housing busts, longer selling times spill over into higher foreclosure risk, thereby magnifying the response …

-to-sell increase with the relative size of their outstanding mortgages. In turn, the liquidity of the housing market associated with … with search in the housing market and defaultable long-term mortgages. In equilibrium, both sellers' asking prices and time … time-to-sell determines the mortgage standards of competitive lenders, measured by the maximum loan-to-value (LTV) ratio …