Urbanization, agglomeration economies, and access to mortgage credit

We examine the effect of urban agglomeration on access to mortgage credit using HMDA data from 1994 to 2008. Previous studies suggest that agglomeration should increase access to specialized workers and information, both of which should enhance liquidity in mortgage lending. Findings indicate that agglomeration economies increase mortgage origination rates and loan amounts in the 1990s, and especially so in higher risk locations. However, agglomeration effects dissipated over the study period. While we do not identify the microfoundations of these patterns, the decline in the influence of agglomeration coincides with the dramatic expansion of secondary mortgage markets and development of information technology, both of which should have reduced regional disparities in access to credit.

► Agglomeration should increase access to specialized workers and information.
► This should enhance liquidity in mortgage lending.
► We find that urbanization improves access to credit in the 1990s.
► Effects dissipate after 2000.
► This coincides with the expansion of secondary markets and information technology.