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After The Fall: An Ex Post Characterization Of Housing Price Declines Across Metropolitan Areas

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  • RICHARD T. CARSON
  • SAMUEL R. DASTRUP

Abstract

Housing prices have plummeted across the United States. This paper examines differences in the magnitude of housing price decreases across metropolitan areas. A relatively small number of housing market variables observable before the fall are capable of explaining over 70% of the considerable variation in price declines. An additional nonparametric analysis suggests that exceeding particular thresholds for some of the key predictors is associated with much larger price drops. These findings are consistent with historical price patterns and raise questions about the validity of mortgage pricing and risk diversification norms in the US. The analysis points to a set of stylized facts concerning the housing price bubble that need to be explained and suggests fruitful hypotheses for understanding the dramatic housing price declines.

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File URL: http://hdl.handle.net/10.1111/j.1465-7287.2011.00290.x
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Bibliographic Info

Article provided by Western Economic Association International in its journal Contemporary Economic Policy.

Volume (Year): 31 (2013)
Issue (Month): 1 (01)
Pages: 22-43

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Handle: RePEc:bla:coecpo:v:31:y:2013:i:1:p:22-43

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  1. Glaeser, Edward L. & Gyourko, Joseph & Saiz, Albert, 2008. "Housing supply and housing bubbles," Journal of Urban Economics, Elsevier, vol. 64(2), pages 198-217, September.
  2. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-37, March.
  3. William N. Goetzmann & Liang Peng & Jacqueline Yen, 2009. "The Subprime Crisis and House Price Appreciation," NBER Working Papers 15334, National Bureau of Economic Research, Inc.
  4. Kelly, Austin, 2007. "Zero down payment mortgage default," MPRA Paper 4318, University Library of Munich, Germany.
  5. Christopher J. Mayer & Karen Pence, 2008. "Subprime Mortgages: What, Where, and to Whom?," NBER Working Papers 14083, National Bureau of Economic Research, Inc.
  6. Chris Mayer & Karen Pence, 2008. "Subprime mortgages: what, where, and to whom?," Finance and Economics Discussion Series 2008-29, Board of Governors of the Federal Reserve System (U.S.).
  7. Jan K. Brueckner, 1990. "Growth Controls and Land Values in an Open City," Land Economics, University of Wisconsin Press, vol. 66(3), pages 237-248.
  8. Atif Mian & Amir Sufi, 2011. "House Prices, Home Equity-Based Borrowing, and the US Household Leverage Crisis," American Economic Review, American Economic Association, vol. 101(5), pages 2132-56, August.
  9. Gabriel Stuart A. & Quigley John M. & Rosenthal Larry A., 2009. "The Mortgage Meltdown, the Economy, and Public Policy," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 9(3), pages 1-17, March.
  10. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
  11. Engle, Robert & Navarro, Peter & Carson, Richard, 1992. "On the theory of growth controls," Journal of Urban Economics, Elsevier, vol. 32(3), pages 269-283, November.
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