Explaining the United States' Uniquely Bad Housing Market

Wharton Real Estate Review, Forthcoming

U of Penn, Inst for Law & Econ Research Paper No. 08-34

29 Pages Posted: 26 Dec 2008

See all articles by Jesse M. Abraham

Jesse M. Abraham

affiliation not provided to SSRN

Andrey D. Pavlov

Simon Fraser University (SFU) - Finance Area

Susan M. Wachter

University of Pennsylvania - Wharton School, Department of Real Estate ; University of Pennsylvania - Finance Department

Date Written: September 17, 2008

Abstract

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

Suggested Citation

Abraham, Jesse M and Pavlov, Andrey D. and Wachter, Susan M., Explaining the United States' Uniquely Bad Housing Market (September 17, 2008). Wharton Real Estate Review, Forthcoming; U of Penn, Inst for Law & Econ Research Paper No. 08-34. Available at SSRN: https://ssrn.com/abstract=1320197

Jesse M Abraham

affiliation not provided to SSRN ( email )

Andrey D. Pavlov

Simon Fraser University (SFU) - Finance Area ( email )

Burnaby, British Columbia V5A 1S6
Canada
604 291 5835 (Phone)
604 291 4920 (Fax)

Susan M. Wachter (Contact Author)

University of Pennsylvania - Wharton School, Department of Real Estate ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104-6330
United States
215-898-6355 (Phone)

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

University of Pennsylvania - Finance Department ( email )

The Wharton School
3620 Locust Walk
Philadelphia, PA 19104
United States

HOME PAGE: http://real.wharton.upenn.edu/~wachter/index.html

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