The Research About The Effects Of Bank Lending Behavior To Real Estate Price

From the development of United States subprime mortgage crisis in2008and thebanking crisis in Spain,we can see the important role of the bank decision-making to the realestate financial stability.The scientific and reasonable estimation and forecast of banks willcontribute to the steady development of real estate marker;Otherwise, will drive up housingbubble or worsen housing crisis,and exacerbate the fluctuation of real estate price.Lots of domestic and foreign scholars have devoted to research those problems,and havegot lots of valuable results. Based on behavioral finance point, through the bank behaviorresearch, this paper reveals how the bank lending behavior impact on real estate prices and therelationship between bank lending behavior and real estate price fluctuation. The research ofthe bank lending behavior mainly based on bank emotions and heuristics. Form thedescription of house money effect and snake-bit effect,we can induce the influence of positiveemotions and negative emotions for bank decision-making.Well,the influence of heuristicsmainly reflects in the short-sight of banks. And, in order to contrast the different equilibriumprice of banks under the influence of emotions and heuristics, this paper firstly design a basicmodel,based on the standard finance theory, and the real estate equilibrium price of the basicmodel. Then, join the bank emotional and heuristics factors to the model, so that we can easilycontrast the different real estates equilibrium price.Using this research method,we can clearlydescribe the behavior characteristic of bank lending on the real estate market, as well as therelationship between them.After the detailed describe of the bank’s lending behaviorcharacteristics, this paper further describes the bank herd behavior caused by competition ofbanks and FaBuZeZhong psychological, and the affection that the bank herd behavior make toreal estate price.Finally,form the aspect of the feedback mechanism,I discuss the interactionbetween banks and real estate price fluctuation.Though the band lending behavior,we can see that in the rise phase of the real estatemarket, the banking sector will be ordinary influenced by positive emotions, and under theinfluence of heuristics,the banks will emerge the cognitive deviation, and furtherunderestimate the real estate market on the loan default rate and income shocks, thus leading to the actual real estate prices deviate from the real equilibrium price level, and make the realestate price rise. On the other hand,the herd behavior of bank credit often leads to theovervalued housing price continues to be overvalued,and the undervalued housing pricecontinues to be undervalued.Meanwhile, through the feedback mechanism, the banking sectorwill have further expected deviation, which lead to real estate prices further deviate from thereal price level. In the constantly amplification effect of feedback mechanism,the real estateprice is higher and higher, and finally form a price bubble. However, once the bubble burst,under the feedback mechanism, the bank’s negative emotions and rules of thumb to cognitivebiases will magnify the real estate shock to the real estate market. For reducing the risk andincreasing security, banks will greatly reduce the real estate credit or increase the real estateloan interest rates,and this will make a greater pressure to the drop of real estate prices. Andthis will easily produce the disaster amplification, which would cause the real estate financialcrisis.Finally, combined with the research,I put forward the corresponding policyrecommendations about the bank behavior and the stability development of the real estate.Forexample,banks should establish and perfect the real estate investment system and credit riskprevention system to effectively reduce the decision-making errors and deviation caused bythe people’s subjective factors.Banks should also enhance the scientific management of loanofficer,and make the effective performance appraisal system and incentive mechanism toreduce the bank employee’s short-term behavior.Also,the government and related supervisiondepartment should actively make a guidance for investors,so that they can make the rightestimates and correct forecast of the future market.