Residential House Prices, Commercial Real Estate and Bank Failures

29 Pages Posted: 18 Apr 2017 Last revised: 25 Apr 2017

Gary S. Fissel

U.S. Federal Deposit Insurance Corporation (FDIC) - Division of Insurance and Research

Gerald A. Hanweck

School of Management George Mason University

Anthony B. Sanders

George Mason University - School of Business

Date Written: April 16, 2017

Abstract

The Great Recession resulted in bank failures that exceeded the savings and loan (S&L) crisis in terms of percentage of institutions and the volume of assets of banks that failed. While much of the literature focuses “subprime” mortgages and its role in this financial crisis, we focus on the effects of residential housing prices. While construction and development loans have typically been a major cause of bank failures, we show that construction and development loans are significant in explaining bank failures through 2011 but regional residential house price movements have been significant through 2014. Furthermore, we show how the regional residential HPI values have significant effects over the Great Recession, particularly in the South Atlantic and Pacific states (better known as the “sand states”).

Keywords: Financial Crisis, Subprime, Bank Failure, Construction

JEL Classification: G21, O18

Suggested Citation

Fissel, Gary S. and Hanweck, Gerald A. and Sanders, Anthony B., Residential House Prices, Commercial Real Estate and Bank Failures (April 16, 2017). Available at SSRN: https://ssrn.com/abstract=2953673 or http://dx.doi.org/10.2139/ssrn.2953673

Gary S. Fissel

U.S. Federal Deposit Insurance Corporation (FDIC) - Division of Insurance and Research ( email )

550 Seventeenth Street, NW
Washington, DC 20057
United States
202-898-3949 (Phone)

Gerald A. Hanweck

School of Management George Mason University ( email )

Fairfax, VA 22030
United States

Anthony Bown Sanders (Contact Author)

George Mason University - School of Business ( email )

Fairfax, VA 22030
United States

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