What Drove the 2003-2006 House Price Boom and Subsequent Collapse? Disentangling Competing Explanations

64 Pages Posted: 8 Dec 2018 Last revised: 8 May 2020

See all articles by John M. Griffin

John M. Griffin

University of Texas at Austin - Department of Finance

Samuel Kruger

University of Texas at Austin - Department of Finance

Gonzalo Maturana

Emory University - Goizueta Business School

Date Written: October 28, 2019

Abstract

Ten years after the financial crisis, the central question of what explains the rise and fall in house prices remains unresolved. We provide a unified framework to examine four excess credit supply variables and three speculation variables that have been proposed in the literature. Credit supply variables, particularly subprime share and worse originator share, strongly relate to future zip code level house price changes in the boom and bust, whereas none of the speculation variables consistently relate to house prices within MSAs. Pre-trends, supply elasticity, and depressed areas suggest these relations are not driven by lenders anticipating house price growth.

Keywords: financial crisis, house price growth, credit supply, mortgage misreporting, housing demand, speculation

JEL Classification: G01, G21, R31

Suggested Citation

Griffin, John M. and Kruger, Samuel and Maturana, Gonzalo, What Drove the 2003-2006 House Price Boom and Subsequent Collapse? Disentangling Competing Explanations (October 28, 2019). Journal of Financial Economics (JFE), Forthcoming, Available at SSRN: https://ssrn.com/abstract=3284278 or http://dx.doi.org/10.2139/ssrn.3284278

John M. Griffin

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States
512-471-6621 (Phone)

HOME PAGE: http://www.jgriffin.info

Samuel Kruger

University of Texas at Austin - Department of Finance ( email )

Red McCombs School of Business
Austin, TX 78712
United States

Gonzalo Maturana (Contact Author)

Emory University - Goizueta Business School ( email )

1300 Clifton Road
Atlanta, GA 30322-2722
United States

HOME PAGE: http://www.gonzalomaturana.com/

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