Real Estate Finance

The economics of Housing & Homelessness

Mortgage

Mortgage Loan

Corporate Bond

Business Loans

Lender

Liquidity Risk

Interest Rate Risk

Prepayment Risk

Default Risk

Legislative Risk

i = r + p + f

Interest Rate

Real Interest Rate

Premium

Expected Inflation

Promissory Note

Mortgage

Obligation to repay the loan

Security for the debt

Personally liable

Lender

Borrower

\textrm{Total Amount} := \sum _{t=1}^n (1 + i)^tP

Let's say that you invested $P at the end of each year for n consecutive years. How much would you have?

Value of an Annuity

t=0
t=n

Banks

Source

Historical Trend

Source

Foreclosures

  • A flag is added to the credit report for 7 years

Source

Long Term Trend Effect

Source

Impact on Home Ownership

Source

Source

What's going on here?