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Housing markets and the financial crisis of 2007-2009: Lessons for the future

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  • Duca, John V.
  • Muellbauer, John
  • Murphy, Anthony

Abstract

An unsustainable weakening of credit standards induced a US mortgage lending and housing bubble, whose consumption impact was amplified by innovations altering the collateral role of housing. In countries with more stable credit standards, any overshooting of construction and house prices owed more to traditional housing supply and demand factors. Housing collateral effects on consumption also varied, depending on the liquidity of housing wealth. Lessons for the future include recognizing the importance of financial innovation, regulation, housing policies, and global financial imbalances for fueling credit, construction, house price and consumption cycles that vary across countries.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Financial Stability.

Volume (Year): 6 (2010)
Issue (Month): 4 (December)
Pages: 203-217

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Handle: RePEc:eee:finsta:v:6:y:2010:i:4:p:203-217

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Web page: http://www.elsevier.com/locate/jfstabil

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Keywords: Financial crisis House prices Credit crunch Subprime mortgages;

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