Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/120808 
Year of Publication: 
2015
Series/Report no.: 
Staff Report No. 709
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
The housing boom that preceded the Great Recession was the result of an increase in credit supply driven by looser lending constraints in the mortgage market. This view on the fundamental drivers of the boom is consistent with four empirical observations: the unprecedented rise in home prices, the surge in household debt, the stability of debt relative to home values, and the fall in mortgage rates. These facts are difficult to reconcile with the popular view that attributes the housing boom to looser borrowing constraints associated with lower collateral requirements. In fact, a slackening of collateral constraints at the peak of the lending cycle triggers a fall in home prices in our framework, providing a novel perspective on the possible origins of the bust.
Subjects: 
housing and credit boom
house prices
collateral constraints
leverage restrictions
JEL: 
E32
E44
Document Type: 
Working Paper

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