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Securitizations in the 1920's

  • William Goetzmann
  • Frank Newman

This paper quantifies the scale and scope of the commercial real estate mortgage bond market in the period surrounding the 1920s in an attempt to better understand the role of retail mortgage debt in early urban development. In particular, this paper quantifies the size of the market, identifies risk factors affecting the coupon yield spread over Treasuries and utilizes a unique data set to construct a commercial mortgage price index over the period 1926-1935. A substantial retail appetite for real estate securities during this period may have significantly contributed to a real construction boom, but overly optimistic speculation in these securities may have led to overbuilding. The rapid deterioration of these securities and a near complete drop in issuance show, ex post, that investors were overconfident in building fundamentals during the boom years. The breakdown in the value of real estate securities as collateral assets preceded the crash of 1929 and may have contributed to the fall of asset prices more generally.

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Paper provided by Yale School of Management in its series Yale School of Management Working Papers with number amz2668.

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Date of creation: 01 Jan 2010
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Handle: RePEc:ysm:somwrk:amz2668
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  1. Leo Grebler & David M. Blank & Louis Winnick, 1956. "Capital Formation in Residential Real Estate: Trends and Prospects," NBER Books, National Bureau of Economic Research, Inc, number greb56-1, December.
  2. William Goetzmann & Liang Peng & Jacqueline Yen, 2012. "The Subprime Crisis and House Price Appreciation," The Journal of Real Estate Finance and Economics, Springer, vol. 44(1), pages 36-66, January.
  3. Eugene N. White, 2009. "Lessons from the Great American Real Estate Boom and Bust of the 1920s," NBER Working Papers 15573, National Bureau of Economic Research, Inc.
  4. Rothberg, James P & Nothaft, Frank E & Gabriel, Stuart A, 1989. "On the Determinants of Yield Spreads between Mortgage Pass-Through and Treasury Securities," The Journal of Real Estate Finance and Economics, Springer, vol. 2(4), pages 301-15, December.
  5. Pierre Collin-Dufresne, 2001. "The Determinants of Credit Spread Changes," Journal of Finance, American Finance Association, vol. 56(6), pages 2177-2207, December.
  6. David C. Wheelock, 2008. "Government response to home mortgage distress: lessons from the Great Depression," Working Papers 2008-038, Federal Reserve Bank of St. Louis.
  7. David C. Wheelock, 2008. "The federal response to home mortgage distress: lessons from the Great Depression," Review, Federal Reserve Bank of St. Louis, issue May, pages 133-148.
  8. Brian A. Maris & William Segal, 2002. "Analysis of Yield Spreads on Commercial Mortgage-Backed Securities," Journal of Real Estate Research, American Real Estate Society, vol. 23(3), pages 235-252.
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