Rationing, mortgage demand and the impact of financial deregulation

Previous studies of mortgage demand use time series data within broader frameworks of housing demand and supply equations. A 'double-hurdle' model that uses cross-section family data on determinants of mortgage demand is proposed as an alternative. The proposed framework separates the determination of mortgage desire and approval from that of loan size. Using 1986 Family Expenditure Survey data, the results indicate imperfect capital markets and the non-neutrality of rationing over the sample period.