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Author: Robert Van Order
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
It has been widely assumed that there was a bubble in the U.S. housing market after 1999. This paper analyzes the extent to which that was true. We define a bubble as: (1) a regime shift that is characterized by a change in the properties of deviations from the fundamentals of house price growth, and (2) where a shock to the fundamental equation is more self sustaining and volatile than in other periods. We model the fundamentals of price growth as a lagged adjustment of prices to the expected present value of future rent. We then study the autoregressive behavior of the residuals thus generated. We look at changes in momentum (the extent to which a shock to house price growth leads to further increases in house price growth) of the residuals. Our results from 44 Metropolitan Statistical Areas for the period of 1980-2005 (quarterly data) are mixed. There is evidence of momentum in house price growth throughout the period, and momentum did increase after 1999, indicating a regime shift; but by a modest amount, and while momentum was sometimes strong it was not explosive. The regime shift was less apparent in the likely bubble candidate cities along the coasts, which had shown high growth in the past. The evidence on volatility is strong. In general, volatility did not increase in the nonbubble MSAs, and it decreased in the faster-growing bubble MSAs.
Author: Robert Van Order
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
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Book Description
It has been widely assumed that there was a bubble in the U.S. housing market after 1999. This paper analyzes the extent to which that was true. We define a bubble as: (1) a regime shift that is characterized by a change in the properties of deviations from the fundamentals of house price growth, and (2) where a shock to the fundamental equation is more self sustaining and volatile than in other periods. We model the fundamentals of price growth as a lagged adjustment of prices to the expected present value of future rent. We then study the autoregressive behavior of the residuals thus generated. We look at changes in momentum (the extent to which a shock to house price growth leads to further increases in house price growth) of the residuals. Our results from 44 Metropolitan Statistical Areas for the period of 1980-2005 (quarterly data) are mixed. There is evidence of momentum in house price growth throughout the period, and momentum did increase after 1999, indicating a regime shift; but by a modest amount, and while momentum was sometimes strong it was not explosive. The regime shift was less apparent in the likely bubble candidate cities along the coasts, which had shown high growth in the past. The evidence on volatility is strong. In general, volatility did not increase in the nonbubble MSAs, and it decreased in the faster-growing bubble MSAs.
Author:
Publisher: DIANE Publishing
ISBN: 1437985297
Category :
Languages : en
Pages : 64
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Book Description
Author: Thomas Sowell
Publisher: Basic Books (AZ)
ISBN: 0465018807
Category : Business & Economics
Languages : en
Pages : 194
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Book Description
Explains how we got into the current economic disaster that developed out of the economics and politics of the housing boom and bust. The "creative" financing of home mortgages and "creative" marketing of financial securities based on these mortgages to countries around the world, are part of the story of how a financial house of cards was built up--and then collapsed.
Author: Adam J. Levitin
Publisher: Harvard University Press
ISBN: 0674246926
Category : Business & Economics
Languages : en
Pages : 401
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Book Description
The definitive account of the housing bubble that caused the Great Recession—and earned Wall Street fantastic profits. The American housing bubble of the 2000s caused the worst global financial crisis since the Great Depression. In this definitive account, Adam Levitin and Susan Wachter pinpoint its source: the shift in mortgage financing from securitization by Fannie Mae and Freddie Mac to “private-label securitization” by Wall Street banks. This change set off a race to the bottom in mortgage underwriting standards, as banks competed in laxity to gain market share. The Great American Housing Bubble tells the story of the transformation of mortgage lending from a dysfunctional, local affair, featuring short-term, interest-only “bullet” loans, to a robust, national market based around the thirty-year fixed-rate mortgage, a uniquely American innovation that served as the foundation for the middle class. Levitin and Wachter show how Fannie and Freddie’s market power kept risk in check until 2003, when mortgage financing shifted sharply to private-label securitization, as lenders looked for a way to sustain lending volume following an unprecedented refinancing wave. Private-label securitization brought a return of bullet loans, which had lower initial payments—enabling borrowers to borrow more—but much greater back-loaded risks. These loans produced a vast oversupply of underpriced mortgage finance that drove up home prices unsustainably. When the bubble burst, it set off a destructive downward spiral of home prices and foreclosures. Levitin and Wachter propose a rebuild of the housing finance system that ensures the widespread availability of the thirty-year fixed-rate mortgage, while preventing underwriting competition and shifting risk away from the public to private investors.
Author: Sergi Basco
Publisher: Springer
ISBN: 3030005879
Category : Business & Economics
Languages : en
Pages : 102
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Book Description
“This book provides an accessible, yet formal framework to understand how housing bubbles arise, their international dimension, their consequences, and ways to prevent them.” Òscar Jordà, University of California, Davis, USA “Basco’s analysis blends, in a very rigorous but enjoyable manner , state-of-the-art theory and historical examples, adding also a very timely and valuable set of policy orientations.” Óscar Arce, Director General, Banco de España, Madrid, Spain Booms and busts of house prices are a recurrent feature throughout history. This book provides a comprehensive overview of the origins and economic consequences of these housing bubbles. The book starts with a formal definition of asset price bubbles and a summary of the most famous episodes, before describing how economists have thought about asset price bubbles; specifically behavioral vs. rational interpretations. These theories are applied to the special case of housing and the same framework is used to explain the implications of financial globalization for capital flows and housing bubbles. After analyzing its origins, the economic consequences of housing bubbles for both households and firms are derived and documented. The final sections are devoted to discussing the effects of financial crises and explain how financial regulation could mitigate the emergence of future housing bubbles. Case studies of the recent housing bubbles in the United States and Spain are also featured in the book. This book will be of value to advanced undergraduate macroeconomic courses, as well as researchers in international economics and macroeconomics and policy makers.
Author: Damian S. Damianov
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
We use vector error correction models to examine the interdependence between the high and the low price tiers during the latest housing market boom and bust. For 118 of the 364 US statistical areas analyzed, the tiered price indexes are bound by a long-run relationship. In general, low tier homes appreciated more than high tier homes in the past two decades. In contrast to previous periods of high volatility, however, low tier homes appreciated more during the boom and lost more value during the bust of the market. We find a shift in the long-run equilibrium during the bubble - the cointegration parameter that ties the tiers together is greater in absolute value during the bubble period compared to the periods of more moderate appreciation and depreciation rates. Moreover, the shift in the long-run equilibrium can be explained by differences in subprime originations across housing markets. We also find that short run price dynamics is driven by momentum in both segments of the market.
Author: Ashok Bardhan
Publisher: John Wiley & Sons
ISBN: 0470647140
Category : Business & Economics
Languages : en
Pages : 576
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Book Description
A global look at the reasons behind the recent economic collapse, and the responses to it The speculative bubble in the housing market began to burst in the United States in 2007, and has been followed by ruptures in virtually every asset market in almost every country in the world. Each country proposed a range of policy initiatives to deal with its crisis. Policies that focused upon stabilizing the housing market formed the cornerstone of many of these proposals. This internationally focused book evaluates the genesis of the housing market bubble, the global viral contagion of the crisis, and the policy initiatives undertaken in some of the major economies of the world to counteract its disastrous affects. Unlike other books on the global crisis, this guide deals with the housing sector in addition to the financial sector of individual economies. Countries in many parts of the world were players in either the financial bubble or the housing bubble, or both, but the degree of impact, outcome, and responses varied widely. This is an appropriate time to pull together the lessons from these various experiences. Reveals the housing crisis in the United States as the core of the meltdown Describes the evolution of housing markets and policies in the run-up to the crisis, their impacts, and the responses in European and Asian countries Compares experiences and linkages across countries and points to policy implications and research lessons drawn from these experiences Filled with the insights of well-known contributors with strong contacts in practice and academia, this timely guide discusses the history and evolution of the recent crisis as local to each contributor's part of the world, and examines its distinctive and common features with that of the U.S., the trajectory of its evolution, and the similarities and differences in policy response.
Author: Hans-Martin Krolzig
Publisher: Springer Science & Business Media
ISBN: 364251684X
Category : Business & Economics
Languages : en
Pages : 369
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Book Description
This book contributes to re cent developments on the statistical analysis of multiple time series in the presence of regime shifts. Markov-switching models have become popular for modelling non-linearities and regime shifts, mainly, in univariate eco nomic time series. This study is intended to provide a systematic and operational ap proach to the econometric modelling of dynamic systems subject to shifts in regime, based on the Markov-switching vector autoregressive model. The study presents a comprehensive analysis of the theoretical properties of Markov-switching vector autoregressive processes and the related statistical methods. The statistical concepts are illustrated with applications to empirical business cyde research. This monograph is a revised version of my dissertation which has been accepted by the Economics Department of the Humboldt-University of Berlin in 1996. It con sists mainly of unpublished material which has been presented during the last years at conferences and in seminars. The major parts of this study were written while I was supported by the Deutsche Forschungsgemeinschajt (DFG), Berliner Graduier tenkolleg Angewandte Mikroökonomik and Sondeiforschungsbereich 373 at the Free University and Humboldt-University of Berlin. Work was finally completed in the project The Econometrics of Macroeconomic Forecasting founded by the Economic and Social Research Council (ESRC) at the Institute of Economies and Statistics, University of Oxford. It is a pleasure to record my thanks to these institutions for their support of my research embodied in this study.
Author: T. J. Pempel
Publisher: Cornell University Press
ISBN: 1501707353
Category : Political Science
Languages : en
Pages : 278
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Book Description
The Liberal Democratic Party, which dominated postwar Japan, lost power in the early 1990s. During that same period, Japan's once stellar economy suffered stagnation and collapse. Now a well-known commentator on contemporary Japan traces the political dynamics of the country to determine the reasons for these changes and the extent to which its political and economic systems have been permanently altered.T. J. Pempel contrasts the political economy of Japan during two decades: the 1960s, when the nation experienced conservative political dominance and high growth, and the early 1990s, when the "bubble economy" collapsed and electoral politics changed. The different dynamics of the two periods indicate a regime shift in which the present political economy deviates profoundly from earlier forms. This shift has involved a transformation in socioeconomic alliances, political and economic institutions, and public policy profile, rendering Japanese politics far less predictable than in the past. Pempel weighs the Japanese case against comparative data from the United States, Great Britain, Sweden, and Italy to show how unusual Japan's political economy had been in the 1960s. Regime Shift suggests that Japan's present troubles are deeply rooted in the economy's earlier success. It is a much-anticipated work that offers an original framework for understanding the critical changes that have affected political and economic institutions in Japan.
Author: MeiChi Huang
Publisher:
ISBN:
Category : Financial crises
Languages : en
Pages : 137
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Book Description
Chapter 3 aims to investigate the effect of a potential important driver of the recent housing price boom and bust people's expectations on the U.S. housing asset returns. Particularly, it extends the volatility feedback model proposed in Kim, Morley and Nelson (KMN 2004) to study the relationship between housing volatility and returns during 1963-2007. The analysis considers two alternative breakpoints --1984Q1 and 1999Q1-- to distinguish permanent structural breakpoints from Markov-switching. The results indicate that the relationship between the U.S. housing volatility and the expected returns is significantly positive. Thus, the important role of people's expectation is strongly supported. The current U.S. housing bubble can be explained by the relationship between housing volatility and realized returns, and that between housing volatility and expected returns. Corresponding to Chapter 2, this chapter also indicates a strong association between housing cycles and business cycles, and a remarkable uncertainty in the U.S. housing market during the post-1999.
