The subprime crisis and its role in the financial crisis
This paper discusses some of the key characteristics of the U.S. subprime mortgage boom and bust and discusses the causes, particularly related to the relationship between subprime mortgage defaults and housing prices. We observe that housing prices and mortgage defaults had distinctly localized trends, but those trends ceased by 2005 when several states studied in this paper (Arizona, California and Nevada) began to move together. Furthermore, we observe the seriously delinquent subprime mortgages increased much more rapidly than was anticipated by historically-based econometric models. As such, this paper offers a partial explanation for how financial institutions misunderstood the declining house prices and increasing subprime default.
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- Edward L. Glaeser & Joseph Gyourko & Raven E. Saks, 2005.
"Why Have Housing Prices Gone Up?,"
Harvard Institute of Economic Research Working Papers
2061, Harvard - Institute of Economic Research.
- Brent Ambrose & Anthony Sanders, 2004. "Legal Restrictions in Personal Loan Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 30(2), pages 133-151, November.
- Edward E. Leamer, 2007.
"Housing is the business cycle,"
Proceedings - Economic Policy Symposium - Jackson Hole,
Federal Reserve Bank of Kansas City, pages 149-233.
- Yuliya Demyanyk & Otto Van Hemert, 2007. "Understanding the subprime mortgage crisis," Supervisory Policy Analysis Working Papers 2007-05, Federal Reserve Bank of St. Louis.
- Patric H. Hendershott & John C. Weicher, 2002. "Forecasting Housing Markets: Lessons Learned," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 30(1), pages 1-11.
- Christopher L. Foote & Kristopher S. Gerardi & Lorenz Goette & Paul S. Willen, 2008. "Subprime facts: what (we think) we know about the subprime crisis and what we don’t," Public Policy Discussion Paper 08-2, Federal Reserve Bank of Boston.
- Karen M. Pence, 2006. "Foreclosing on Opportunity: State Laws and Mortgage Credit," The Review of Economics and Statistics, MIT Press, vol. 88(1), pages 177-182, February.
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