What happens to banks when house prices fall? U.S. regional housing busts of the 1980s and 1990s
AbstractThe recent rapid appreciation of house prices in many U.S. markets has prompted concern over the possible effects of a sharp decline in prices, especially for commercial banks and other real estate lenders. This article examines regional real estate booms and busts in the 1980s and 1990s: Only about half of state house price booms were followed by a severe decline in prices, but large declines occurred in several states that did not have a prior boom. Banks in states that had large house price declines experienced high loan default rates and, thus, low profit and high failure rates. Although U.S. banks may have become more exposed to residential real estate recently, they appear less vulnerable to a decline in house prices than banks in states with large price declines in the earlier period.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Federal Reserve Bank of St. Louis in its journal Review.
Volume (Year): (2006)
Issue (Month): Sep ()
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Joshua Gallin, 2004. "The long-run relationship between house prices and rents," Finance and Economics Discussion Series 2004-50, Board of Governors of the Federal Reserve System (U.S.).
- Alan Greenspan, 2004. "Risk and Uncertainty in Monetary Policy," American Economic Review, American Economic Association, vol. 94(2), pages 33-40, May.
- Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2012.
"Comparing Wealth Effects: The Stock Market versus The Housing Market,"
Department of Economics, Working Paper Series
qt6px1d1sc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Case Karl E. & Quigley John M. & Shiller Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," The B.E. Journal of Macroeconomics, De Gruyter, vol. 5(1), pages 1-34, May.
- Karl E. Case, John M. Quigley, Robert J. Shiller., 2001. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Economics Working Papers E01-308, University of California at Berkeley.
- Karl E. Case & John M. Quigley & Robert J. Shiller, 2001. "Comparing Wealth Effects: The Stock Market versus the Housing Market," Cowles Foundation Discussion Papers 1335, Cowles Foundation for Research in Economics, Yale University.
- Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2001. "Comparing Wealth Effects: The Stock Market versus The Housing Market," Department of Economics, Working Paper Series qt44k6g6vx, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- Karl E. Case & Robert J. Shiller & John M. Quigley, 2001. "Comparing Wealth Effects: The Stock Market Versus the Housing Market," NBER Working Papers 8606, National Bureau of Economic Research, Inc.
- Case, Karl E. & Quigley, John M. & Shiller, Robert J., 2005. "Comparing Wealth Effects: The Stock Market versus the Housing Market," Berkeley Program on Housing and Urban Policy, Working Paper Series qt28d3s92s, Berkeley Program on Housing and Urban Policy.
- 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.
- Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing high house prices: bubbles, fundamentals, and misperceptions," Staff Reports 218, Federal Reserve Bank of New York.
- Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions," NBER Working Papers 11643, National Bureau of Economic Research, Inc.
- Malpezzi, Stephen, 1999.
"A Simple Error Correction Model of House Prices,"
Journal of Housing Economics,
Elsevier, vol. 8(1), pages 27-62, March.
- Joe Peek & Eric S. Rosengren, 1992. "The capital crunch in New England," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 21-31.
- Nathalie Girouard & Mike Kennedy & Paul van den Noord & Christophe André, 2006. "Recent House Price Developments: The Role of Fundamentals," OECD Economics Department Working Papers 475, OECD Publishing.
- William R. Emmons, 2008. "The mortgage crisis: let markets work, but compensate the truly needy," The Regional Economist, Federal Reserve Bank of St. Louis, issue Jul, pages 10-16.
- Nneji, Ogonna & Brooks, Chris & Ward, Charles W.R., 2013. "House price dynamics and their reaction to macroeconomic changes," Economic Modelling, Elsevier, vol. 32(C), pages 172-178.
- Craig P. Aubuchon & David C. Wheelock, 2010. "The geographic distribution and characteristics of U.S. bank failures, 2007-2010: do bank failures still reflect local economic conditions?," Review, Federal Reserve Bank of St. Louis, issue Sep, pages 395-415.
- Chad R. Wilkerson & Megan D. Williams, 2011. "Booms and busts in household wealth: implications for Tenth District states," Economic Review, Federal Reserve Bank of Kansas City, issue Q II.
- Zohrabyan, Tatevik & Leatham, David J. & Bessler, David A., 2008. "Cointegration Analysis of Regional House Prices in U.S," Proceedings: 2007 Agricultural and Rural Finance Markets in Transition, October 4-5, 2007, St. Louis, Missouri 48138, Regional Research Committee NC-1014: Agricultural and Rural Finance Markets in Transition.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anna Xiao).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.