John Mondragon

I am a research advisor at the Federal Reserve Bank of San Francisco! I work on the mortgage and housing markets and empirical macroeconomics. The opinions here are my own and do not necessarily reflect the position of the Federal Reserve Bank of San Francisco or the Federal Reserve System.


Working Papers and Projects

Housing Demand and Remote Work

with Johannes Wieland

We show that the shift to remote work explains over one half of the record 23.8 percent national house price increase from 2019 to 2021. Using variation in remote work exposure across U.S. metropolitan areas we estimate that an additional percentage point of remote work causes a 0.98 percent increase in house prices after controlling for negative spillovers from migration. This finding reflects an aggregate increase in demand for home space: remote work causes a similar increase in residential rents, a decline in commercial rents, a greater increase in prices for larger homes, and a decline in household size among movers. The cross-sectional effect on house prices combined with the aggregate shift to remote work implies that remote work raised aggregate U.S. house prices by 16.0 percent. Using a model of remote work and location choice we argue that this estimate is a lower bound on the aggregate effect. Our results argue for a fundamentals-based explanation for the recent increases in housing costs over speculation or financial factors, and that the evolution of remote work is likely to have large effects on the future path of house prices and inflation.

Dynastic Home Equity

with Matteo Bennetton and Marianna Kudlyak

Using a nationally representative panel of consumer credit records for the US from1999 to 2021, we document a positive correlation between child and parent homeownership. We propose a new causal mechanism behind this relationship based on parents extracting home equity to help finance their child's home purchase and quantify this mechanism in several ways. First, controlling for cohort, zip code, age, and the credit-worthiness of parents and children, we find that children whose parents extract equity are 60% more likely to become a homeowner than children whose homeowner-parents do not extract equity. Second, using an event study approach, we find that the increase in child homeownership occurs almost entirely in the year when parents extract equity. Third, using variation in equity extraction induced by households near leverage constraints, we find parental equity extraction increases the child's probability of becoming a homeowner by about five times. Our results highlight the importance of familial wealth for household wealth accumulation and housing wealth in particular. A back-of-the-envelope calculation suggests that dynastic home equity increases housing wealth inequality among young adults by 20%.

Credit Supply, Rationing, and Deleveraging in the Mortgage Market (Draft coming soon)

How do credit supply constraints affect the price and quantity of borrowing? Comparing borrowers with loans above and below the conforming loan limits shows that credit supply in the jumbo market was relatively tight from March 2020 to about September 2021. As a result, jumbo borrowers faced interest rates 15-30 basis points higher, refinancing probabilities were 50 percent lower, and jumbo borrowers that did refinance also deleveraged by as much as four percent. These effects on the extensive and intensive margin of refinancing are at least an order of magnitude larger than expected given the increase in the cost of borrowing. Using discrete choice methods and a novel counterfactual, I directly estimate the price and non-price channels of the credit supply shock and find that vast majority of the effects on credit quantities were caused by non-price credit rationing.

Household Credit and Employment in the Great Recession

(updated 8/2020)

Revise and resubmit at the Journal of Finance

How much did shocks to household credit supply reduce employment in the Great Recession? To answer this, I provide a general foundation for shift-share credit supply shocks, showing that they are useful for bounding partial equilibrium aggregate effects but direct estimates may be biased. Combining the shocks with a natural experiment addresses the bias and shows contractions in credit supply to households reduced local economic activity, with one standard deviation decline in the shock reducing employment by 3 percent. Aggregating these effects implies the household credit channel can explain employment losses of at least 20 percent of the aggregate decline.


No Job, No Money, No Refi: Frictions to Refinancing in a Recession

with Anthony DeFusco

Journal of Finance

We study how employment documentation requirements and out-of-pocket closing costs constrain mortgage refinancing. These frictions, which bind most severely during recessions, may significantly inhibit monetary policy pass-through. To study their effects on refinancing, we exploit an FHA policy change that excluded unemployed borrowers from refinancing and increased others’ out-of-pocket costs substantially. These changes dramatically reduced refinancing rates, particularly among the likely unemployed and those facing new out-of-pocket costs. Our results imply that unemployed and liquidity-constrained borrowers have a high latent demand for refinancing. Cyclical variation in these factors may therefore affect both the aggregate and distributional consequences of monetary policy.

Regulating Household Leverage

with Anthony DeFusco and Stephanie Johnson

Review of Economic Studies

This paper studies how credit markets respond to policy constraints on household leverage. Exploiting a sharp policy-induced discontinuity in the cost of originating certain high-leverage mortgages, we study how the Dodd-Frank “Ability-to-Repay” rule affected the price and availability of credit in the U.S. mortgage market. Our estimates show that the policy had only moderate effects on prices, increasing interest rates on affected loans by 10-15 basis points. The effect on quantities, however, was significantly larger; we estimate that the policy eliminated 15 percent of the affected market completely and reduced leverage for another 20 percent of remaining borrowers. This reduction in quantities is much greater than would be implied by plausible demand elasticities and suggests that lenders responded to the policy primarily by rationing credit. Finally, while the policy succeeded in reducing leverage, our estimates suggest this effect would have only slightly reduced aggregate default rates during the housing crisis.

Does Greater Inequality Lead to More Household Borrowing? New Evidence from Household Data

with Olivier Coibion, Yuriy Gorodnichenko, and Marianna Kudlyak

Journal of the European Economic Association

Using household-level debt data over 2000-2012 and local variation in inequality, we show that low-income households in high-inequality regions (zip-codes, counties, states) accumulated less debt relative to their income than low-income households in lower-inequality regions. We also find evidence that low-income households face higher credit prices and reduced access to credit as inequality increases. We argue that these patterns are consistent with inequality tilting credit supply away from low-income households and toward high-income households, which may have long-run implications for outcomes like homeownership or entrepreneurship.

Work in Progress

The Housing Crisis and the Rise in Student Loans

(draft coming soon)

with Gene Amromin and Janice Eberly

We study if the changes in U.S. house prices over the 2000s affected growth in student loans. Using household-level panel survey data, we find that as home prices fall households depend less on home equity extraction to finance college enrollment and depend more on student loans. We estimate that for every lost dollar of home equity credit that would have been used to finance college enrollment, households increase student loan debt by forty to sixty cents. This substitution appears to be driven primarily by households with low levels of liquid assets. We extend our analysis with credit bureau data to trace longer-run effects of this leverage on students. Our results show that the decline in house prices reduced households’ ability to finance college enrollment with home equity credit, but that constrained households mostly responded by continuing to enroll in college and relying on student loans. Our estimates suggests the 30% fall in house prices from the 2006 peak resulted in the average college student borrowing an additional $1,300 in student loans, with some evidence of larger effects on liquidity-constrained and less-educated households.

Default and Deleveraging in the Business Cycle

with Stephen Terry

Sources of Heterogeneity in Retail Price-Setting Behavior

with Bulat Gafarov, Daniel Greenwald, and Leonid Ogrel