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Abstract
Various studies have examined the relationship between the availability and cost of credit and the value of housing starts at the national level. The research reported here is the first to examine the effect of funds flows and interest rates on the value of housing starts in a regional market. Several measures of funds flows are used to measure the effect the changing composition of thrift liabilities, as well as interest rates, had on housing starts. The effect of monetary policy changes in the late 1970s on housing starts is also examined.
Measures of low-rate savings flows, high-rate savings flows, Federal Home Loan Bank Advances and the net change in demand and time deposits at commercial banks affected housing starts in the expected manner. Interest rates similarly had the expected effect on housing starts. Of greater interest is the finding that changes in savings flows in these categories after 1979 did not significantly alter the value of housing starts. These results suggest that recent policies deregulating interest rates on deposit flows should not affect housing starts if financial institutions can attract new funds, regardless of the level of interest rates.
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Notes on contributors
Paul R. Goebel
Paul R. Goebel is Associate Professor of Finance and Timothy W. Koch is Associate Professor of Finance, Texas Tech University, Lubbock, Texas.
Karl L. Guntermann
Karl L. Guntermann is Arizona Realtors Professor of Real Estate, Department of Finance, Arizona State University, Tempe, Arizona.
Timothy W. Koch
Paul R. Goebel is Associate Professor of Finance and Timothy W. Koch is Associate Professor of Finance, Texas Tech University, Lubbock, Texas.