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The Bursting of the Real Estate Bubble: More than a Trigger for the Financial Crisis

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  • Ewald Walterskirchen

    (WIFO)

Abstract

The bursting of the housing bubble in the USA was a key factor to propel the ensuing financial crisis. When real estate suffers a massive loss of value, banks are in greater trouble than when faced with a stock market crash because land is the main collateral for bank loans and home ownership is much more widespread than shareholdings. Historical studies have found a close link between real estate crises and financial crises. A collapse of real estate prices typically precedes a financial crisis by about a year.

Suggested Citation

  • Ewald Walterskirchen, 2009. "The Bursting of the Real Estate Bubble: More than a Trigger for the Financial Crisis," WIFO Monatsberichte (monthly reports), WIFO, vol. 82(12), pages 943-950, December.
  • Handle: RePEc:wfo:monber:y:2009:i:12:p:943-950
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    References listed on IDEAS

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    1. Edward E. Leamer, 2007. "Housing is the business cycle," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 149-233.
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