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Root Causes of The Housing Bubble

Author

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  • Kaizoji, Taisei

Abstract

In this chapter we investigate root causes of the recent U.S. housing bubble which has been caused a serious downturn in U.S. economic growth since autumn of 2008. We propose a simple model of housing markets in order to indicate the possible determinants of recent housing prices. Utilizing the model, we verify a number of hypotheses which have been proposed in the recent literature on the housing bubbles. We suggest that the main causes of the housing bubble from 2000 to 2006 are (i) non-elastic housing supply in the metropolitan areas, and (ii) declines in the mortgage loan rate and the housing premium by the massive mortgage credit expansion. We also suggest that these factors were strongly influenced by policies that governments and the Federal reserve Board performed.

Suggested Citation

  • Kaizoji, Taisei, 2009. "Root Causes of The Housing Bubble," MPRA Paper 16808, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:16808
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    References listed on IDEAS

    as
    1. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
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    Full references (including those not matched with items on IDEAS)

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    Keywords

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    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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