Residential House Prices, Commercial Real Estate and Bank Failures

41 Pages Posted: 1 Jul 2017

See all articles by Gary S. Fissel

Gary S. Fissel

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

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: June 29, 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 regional residential house prices and construction and land development loans are significant in explaining bank failures through 2011 but the regional residential house price movements have been significant through 2015. Furthermore, we show how the regional residential house price index (HPI) values have significant effects over the Great Recession, particularly in the South Atlantic and Pacific states (better known as the “sand states”).

Keywords: Banking, Crisis, Lending

JEL Classification: B26, G20, G21, G28

Suggested Citation

Fissel, Gary S. and Hanweck, Gerald A. and Sanders, Anthony Bown, Residential House Prices, Commercial Real Estate and Bank Failures (June 29, 2017). Available at SSRN: https://ssrn.com/abstract=2995113 or http://dx.doi.org/10.2139/ssrn.2995113

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

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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