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Collateral Damage: The Impact of Foreclosures on New Home Mortgage Lending in the 1930s

Author

Listed:
  • Fishback, Price
  • Fleitas, Sebastian
  • Rose, Jonathan
  • Snowden, Ken

Abstract

The Great Depression of the 1930s involved a severe disruption in the supply of home mortgage credit. This paper empirically identifies a mechanism lying behind this credit crunch: the impairment of lenders’ balance sheets by illiquid foreclosed real estate. With data on hundreds of building and loans (B&Ls), the leading mortgage lenders in this period, we find that the overhang of foreclosed real estate explains about 30 percent of the drop in new lending between 1930 and 1935.

Suggested Citation

  • Fishback, Price & Fleitas, Sebastian & Rose, Jonathan & Snowden, Ken, 2020. "Collateral Damage: The Impact of Foreclosures on New Home Mortgage Lending in the 1930s," The Journal of Economic History, Cambridge University Press, vol. 80(3), pages 853-885, September.
    • Handle: RePEc:cup:jechis:v:80:y:2020:i:3:p:853-885_7
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    Cited by:

    1. Constantinescu, Mihnea & Nguyen, Anh Dinh Minh, 2021. "A century of gaps: Untangling business cycles from secular trends," Economic Modelling, Elsevier, vol. 100(C).
    2. Jonathan D. Rose, 2022. "Reassessing the magnitude of housing price declines and the use of leverage in the Depressions of the 1890s and 1930s," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 50(4), pages 907-930, December.
    3. Quincy, Sarah, 2022. "Income shocks and housing spillovers: Evidence from the World War I Veterans’ Bonus," Journal of Urban Economics, Elsevier, vol. 132(C).

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N22 - Economic History - - Financial Markets and Institutions - - - U.S.; Canada: 1913-
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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