Explaining the United States' Uniquely Bad Housing Market
Wharton Real Estate Review, Forthcoming
29 Pages Posted: 26 Dec 2008
Date Written: September 17, 2008
Despite national economic and real estate market trends that are not unique in U.S. history, the housing market woes of the United States appear to be developing into an historic, adverse episode. Indeed other countries have experienced the same fundamental forces and find themselves with nowhere near the level of U.S. economic repercussions and their housing markets are not nearly as threatened. We argue that the U.S. experienced a unique expansion of credit and deterioration of residential mortgage lending standards. This shift in the credit supply temporarily fueled housing prices beyond levels justified by favorable demographic and macroeconomic conditions. The subsequent withdrawal of credit has resulted in severe housing market declines as well as contributed to the adverse macroeconomic conditions that are in place today.
Keywords: Real Property, real estate, realty, mortgages, housing prices, aggressive lending, credit expansion, lending standards, leverage, real estate cycle, housing bubble, housing market declines
JEL Classification: D12, K11, L85
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