Abstract I identify the effect of financial constraints on product prices using granular data on home-builder housing developments from the 2006–2009 housing crisis. Builders who experience losses in one area subsequently sell homes in unaffected areas at a discount to raise cash quickly. When builders cut prices, they sell homes faster and builders cut prices more in areas in which price cuts produce larger declines in time-to-sale. Financially constrained firms are more likely to cut prices of homes in healthy areas following losses elsewhere. Firms cut prices following losses in other projects only during the crisis, not during the boom.

We show that the strong negative effect of higher mortgage rates on cash-out refinancing reflects substitution into other borrowing products, not large changes in total new household borrowing. We exploit plausibly exogenous changes in interest rates due to unconventional monetary policy surprises to show that changes in cash-out and other borrowing are roughly offsetting. The elasticity of new household borrowing with respect to mortgage rates is low and varies little with the borrower’s outstanding mortgage rate. Our results suggest that the cash-out refinance channel of unconventional monetary policy is weak and not path dependent. (JEL E43, E52, G21, G51)