As 2006 draws to a close, one economic development that stands out over the year is the slowdown in the housing sector. In particular, the slowdown raises concerns about the perceived shift households have made toward "alternative" mortgage products, which may leave them more exposed to negative effects from higher interest rates and falling house prices. In this Economic Letter, I take a somewhat longer view and put alternative mortgages in the context of the history of innovation in the U.S. mortgage market. I then examine the ways in which this innovation may be affecting the housing consumption decisions facing U.S. households.
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Article provided by Federal Reserve Bank of San Francisco in its journal FRBSF Economic Letter.
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