Residential House Prices, Commercial Real Estate and Bank Failures

30 Pages Posted: 18 Apr 2017 Last revised: 20 Feb 2018

Gerald A. Hanweck

George Mason University - Department of Finance

Anthony B. Sanders

George Mason University - School of Business

Multiple version iconThere are 2 versions of this paper

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

Hanweck, Gerald A. and Sanders, Anthony B., Residential House Prices, Commercial Real Estate and Bank Failures (April 16, 2017). George Mason University School of Business Research Paper No. 18-1. Available at SSRN: https://ssrn.com/abstract=2953673 or http://dx.doi.org/10.2139/ssrn.2953673

Gerald A. Hanweck

George Mason University - Department of Finance ( 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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