Credit Supply and Housing Prices in National and Local Markets

18 Pages Posted: 11 Oct 2014 Last revised: 23 May 2015

See all articles by Susan M. Wachter

Susan M. Wachter

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

Date Written: October 9, 2014

Abstract

The phenomenon of “irrational exuberance” around housing prices is now well established as a driving force of housing bubbles. However, the roles of credit supply and the mispricing of credit are less well understood. This article discusses the recent literature on the relationship between credit supply and housing prices in national and local markets, with a view to identifying gaps in understanding this relationship as well as the implications of these gaps for the ability of market participants and regulators to detect systemic risk. This article also connects the literature to this special issue, which emphasizes the importance of understanding local market conditions, including ways in which housing finance affects and is in turn affected by local markets.

Keywords: Real estate economics; Housing economics; Systemic risk

Suggested Citation

Wachter, Susan M., Credit Supply and Housing Prices in National and Local Markets (October 9, 2014). Available at SSRN: https://ssrn.com/abstract=2508029 or http://dx.doi.org/10.2139/ssrn.2508029

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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