In Brazil a massive affordable housing financing programme for the poor started an ascending spiral of prices industry-wide.

Unfortunatelly there aren't many studies on the matter and no one in English that I remember.

The programme is called "Minha Casa Minha Vida" (My House My Life). You can google it up.

Thank you Fernando,

My hypothesis is more related to how sellers could discount the house price because of quick availability if buyers pay immediately (cash) versus payment with credit (which could take several weeks or months to complete). In this respect, I was wondering about similar studies.

In the Brazilian programme the developers received the money from the government agency in advance.

Costin, I think that your guess might be right. But today there are few (developed) countries with majority of transactions in cash (including buying house).

Credit indeed can have an important influence on prices. Partly because people are partly irrational, and cannot evaluate if they can be able to repay, especially when initial conditions are favourable. I studied such case in Spain, look at my conference paper on RG: "Dynamics of Interest Rate and Spanish Housing Markets" (2003), see page 3 of my publications. I also have few more conference papers on similar topics, like  "Interaction between Housing and Financial Markets" (with Carreras, 2004), where negative correlation between housing and financial markets was detected empirically for Spain.

Costin-

In the U.S., the property appraisal industry has a line item within the standard appraisal form (Uniform Residential Appraisal Report) which provides appraisers some room to discount for creative financing.  For example, if the seller wanted to raise the price of the property $10,000 over market value and simultaneously provide the same amount to the buyer at the closing table, this helps to recognize true market value.  Thus, you might want to check out some of the literature on property appraisal.  The Appraisal Journal is a resource for you, although it might be a little more practitioner-oriented.

Good luck to you!

On a related note, an issue that could complicate you analysis is that numerous researchers report that single-family house transactions financed with a below-market interest rate loan sell at a premium compared to transactions financed at market rates. This relationship has been shown to apply regardless of the particular form of the lending arrangement, including when buyers assume an existing mortgage which was originated by an institutional lender (Sirmans, et al. (1984), Agarwal and Philips (1985), Malatesta and Hess (1986) and Sunderman, et al. (1990), among a host of others, or obtain a new below-market rate mortgage loan originated by an institutional lender or government agency (Berger (2000)), or obtain a new below-market rate mortgage from the house seller (Stratham, et al. (1984) or use an installment land contract (Haurin and Hendershott (1986) and Mooney (1990)).

yes.

“The Value of Mortgage Assumptions: An Empirical Test,” (with  Mark A. Sunderman and Roger E. Cannaday), Journal of Real Estate Research, Vol. 5, No. 2, Summer 1990.  Reprinted in Contemporary Real Estate Finance: Selected Readings, John Major & Fung-Shine             Pan, eds., Prentice Hall, 1996, pp. 62-72.

“Real Estate Valuation Models: Lender and Equity Investor Criteria,” (with Roger E. Cannaday), AREUEA Journal, Vol. 14, No. 2, Summer 1986, pp. 317-337.

“Discount Points and Housing Prices: Comment,” (with C. F. Sirmans and Karl Guntermann), Journal of Finance, September 1979, pp. 1049-1054.

yes

the more creative and risky the finance methods, the more the bubble grows...but all bubbles pop...for a good look at things reference McKay and his insightful book on bubbles including tulipmania..leverage is a double edge sword...and almost all finance is about leverage.. so to answer your question credit is inflationary to all markets and prices, real estate being a great example..but it is the best system there is...so we can fine tune what works and try to improve

the book is

Extraordinary Popular Delusions and the Madness of Crowds

by Charles Mackay