Household Mortgage Refinancing Decisions Are Neighbor Influenced

Neighborhood social influence effects have been shown to affect publicly observable decisions, but their role in private decisions, like refinancing, remains unclear. Using precisely geolocated data and a nearest-neighbor research design, we find that households are 7 percent more likely to refinance if a neighbor within 50 meters has recently refinanced. Consistent with a word-of-mouth mechanism, social influence effects are weaker when neighbors are farther away and non-existent for non-occupants. Our results illustrate the importance of the proximate community for household wealth accumulation and the transmission of monetary policy.