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If Prices Fall, Mortgage Foreclosures Will Rise

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Abstract

In our previous post, we illustrated the recent extraordinarily strong growth in home prices and explored some of its key spatial patterns. Such price increases remind many of the first decade of the 2000s when home prices reversed, contributing to a broad housing market collapse that led to a wave of foreclosures, a financial crisis, and a prolonged recession. This post explores the risk that such an event could recur if home prices go into reverse now. We find that although the situation looks superficially similar to the brink of the last crisis, there are important differences that are likely to mitigate the risks emanating from the housing sector.

Suggested Citation

  • Andrew F. Haughwout & Belicia Rodriguez, 2021. "If Prices Fall, Mortgage Foreclosures Will Rise," Liberty Street Economics 20210908b, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:93032
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    File URL: https://libertystreeteconomics.newyorkfed.org/2021/09/if-prices-fall-mortgage-foreclosures-will-rise/
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    More about this item

    Keywords

    mortgages; foreclosures; prices;
    All these keywords.

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • 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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