Endogenous Formation and Collapse Of Housing Bubbles
This paper develops an analytical framework and an agent-based spatial model of the housing market. We show that low down payment requirement will cause housing bubbles. With low down payment requirement, a small decrease in the housing price will cause mortgage rate to rise in response to the lowering value of collateral . The rising mortgage rate will further suppress demand and turn the market into a downward spiral. The agent-base model is based on our interviews with local real estate agents. The exploratory work in this paper will help us better understand the housing market, give policy advice, and eventually prevent another damaging housing bubble.
|Date of creation:||08 Jul 2013|
|Contact details of provider:|| Postal: Iowa State University, Dept. of Economics, 260 Heady Hall, Ames, IA 50011-1070|
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Fax: +1 515.294.0221
Web page: http://www.econ.iastate.edu
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- Glaeser, Edward L. & Gyourko, Joseph & Saiz, Albert, 2008.
"Housing supply and housing bubbles,"
Journal of Urban Economics,
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- Sheri Markose & Simone Giansante & Mateusz Gatkowski & Ali Rais Shaghaghi, 2010. "Too Interconnected To Fail: Financial Contagion and Systemic Risk In Network Model of CDS and Other Credit Enhancement Obligations of US Banks," Working Papers 033, COMISEF.
- Markose, Sheri M & Giansante, Simone & Gatkowski, Mateusz & Shaghaghi, Ali Rais, 2010. "Too Interconnected To Fail: Financial Contagion and Systemic Risk in Network Model of CDS and Other Credit Enhancement Obligations of US Banks," Economics Discussion Papers 3716, University of Essex, Department of Economics.
- Mary Riddel, 2011. "Are Housing Bubbles Contagious? A Case Study of Las Vegas and Los Angeles Home Prices," Land Economics, University of Wisconsin Press, vol. 87(1), pages 126-144.
- Goodman, Allen C. & Thibodeau, Thomas G., 2008. "Where are the speculative bubbles in US housing markets?," Journal of Housing Economics, Elsevier, vol. 17(2), pages 117-137, June.
- John Geanakoplos, 2009. "The Leverage Cycle," Cowles Foundation Discussion Papers 1715, Cowles Foundation for Research in Economics, Yale University. Full references (including those not matched with items on IDEAS)
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