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Are Housing Prices, Household Debt, and Growth Sustainable?

Author

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  • Dimitri B. Papadimitriou
  • Edward Chilcote
  • Gennaro Zezza

Abstract

Rising home prices and low interest rates have fueled the recent surge in mortgage borrowing and enabled consumers to spend at high rates relative to their income. Low interest rates have counterbalanced the growth in debt and acted to dampen the growth in household debt-service burdens. As past Levy Institute strategic analyses have pointed out, these trends are not sustainable: Household spending relative to income cannot grow indefinitely.

Suggested Citation

  • Dimitri B. Papadimitriou & Edward Chilcote & Gennaro Zezza, 2006. "Are Housing Prices, Household Debt, and Growth Sustainable?," Economics Strategic Analysis Archive sa_jan_06, Levy Economics Institute.
    • Handle: RePEc:lev:levysa:sa_jan_06
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    References listed on IDEAS

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    1. Dimitri B. Papadimitriou & Anwar Shaikh & Claudio H. dos Santos & Gennaro Zezza, 2002. "Is Personal Debt Sustainable?," Economics Strategic Analysis Archive 02-11, Levy Economics Institute.
    2. Dean Baker, 2002. "The Run-up in Home Prices: A Bubble," Challenge, Taylor & Francis Journals, vol. 45(6), pages 93-119.
    3. Karl E. Case & Robert J. Shiller, 2003. "Is There a Bubble in the Housing Market?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 299-362.
    4. Wynne Godley & Dimitri B. Papadimitriou & Claudio H. Dos Santos & Gennaro Zezza, 2005. "The United States and Her Creditors: Can the Symbiosis Last?," Economics Strategic Analysis Archive sa_sep_05, Levy Economics Institute.
    5. Marco Del Negro & Christopher Otrok, 2005. "Monetary policy and the house price boom across U.S. states," FRB Atlanta Working Paper 2005-24, Federal Reserve Bank of Atlanta.
    6. Alan Greenspan, 2005. "Mortgage banking: a speech to the American Bankers Association Annual Convention, Palm Desert, California (via satellite), September 27, 2005," Speech 132, Board of Governors of the Federal Reserve System (U.S.).
    7. anonymous, 2004. "Asset prices and monetary policy," Reserve Bank of New Zealand Bulletin, Reserve Bank of New Zealand, vol. 67, march.
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    Citations

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    Cited by:

    1. Jörg Bibow, 2007. "Global Imbalances, Bretton Woods II, and Euroland’s Role in All This," Palgrave Macmillan Books, in: Jörg Bibow & Andrea Terzi (ed.), Euroland and the World Economy, chapter 1, pages 15-42, Palgrave Macmillan.
    2. Dimitri B. Papadimitriou & L. Randall Wray, 2007. "The April AMT Shock: Tax Reform Advice for the New Majority," Economics Policy Note Archive 07-1, Levy Economics Institute.
    3. Júlia Király & Márton Nagy & Viktor E. Szabó, 2008. "Contagion and the beginning of the crisis – pre-Lehman period," MNB Occasional Papers 2008/76, Magyar Nemzeti Bank (Central Bank of Hungary).
    4. Greg Hannsgen, 2007. "A Random Walk Down Maple Lane? A Critique of Neoclassical Consumption Theory with Reference to Housing Wealth," Review of Political Economy, Taylor & Francis Journals, vol. 19(1), pages 1-20.
    5. Eckhard Hein & Achim Truger, 2007. "Germany’s Post-2000 Stagnation in the European Context — a Lesson in Macroeconomic Mismanagement," Palgrave Macmillan Books, in: Philip Arestis & Eckhard Hein & Edwin Heron (ed.), Aspects of Modern Monetary and Macroeconomic Policies, chapter 12, pages 223-247, Palgrave Macmillan.
    6. Scott T. Fullwiler, 2016. "The Debt Ratio and Sustainable Macroeconomic Policy," World Economic Review, World Economics Association, vol. 2016(7), pages 12-42, July.
    7. Király, Júlia & Nagy, Márton & Szabó E., Viktor, 2008. "Egy különleges eseménysorozat elemzése - a másodrendű jelzáloghitel-piaci válság és (hazai) következményei [Analysis of a special sequence of events - the crisis on the secondary mortgage market an," Közgazdasági Szemle (Economic Review - monthly of the Hungarian Academy of Sciences), Közgazdasági Szemle Alapítvány (Economic Review Foundation), vol. 0(7), pages 573-621.
    8. Jörg Bibow, 2010. "Alternative Strategien der Budgetkonsolidierung in Österreich nach der Rezession," IMK Studies 03-2010, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.
    9. Jan Čadil, 2009. "Housing price bubble analysis - case of the Czech republic," Prague Economic Papers, Prague University of Economics and Business, vol. 2009(1), pages 38-47.
    10. Robert W. Parenteau, 2006. "U.S. Household Deficit Spending: A Rendezvous with Reality," Economics Public Policy Brief Archive ppb_88, Levy Economics Institute.
    11. Eric Tymoigne, 2007. "A Hard-Nosed Look at Worsening U.S. Household Finance," Challenge, Taylor & Francis Journals, vol. 50(4), pages 88-111.

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