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Housing markets and the financial crisis of 2007-2009: Lessons for the future

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  • Duca, John V.
  • Muellbauer, John
  • Murphy, Anthony

Abstract

An unsustainable weakening of credit standards induced a US mortgage lending and housing bubble, whose consumption impact was amplified by innovations altering the collateral role of housing. In countries with more stable credit standards, any overshooting of construction and house prices owed more to traditional housing supply and demand factors. Housing collateral effects on consumption also varied, depending on the liquidity of housing wealth. Lessons for the future include recognizing the importance of financial innovation, regulation, housing policies, and global financial imbalances for fueling credit, construction, house price and consumption cycles that vary across countries.

Suggested Citation

  • Duca, John V. & Muellbauer, John & Murphy, Anthony, 2010. "Housing markets and the financial crisis of 2007-2009: Lessons for the future," Journal of Financial Stability, Elsevier, vol. 6(4), pages 203-217, December.
    • Handle: RePEc:eee:finsta:v:6:y:2010:i:4:p:203-217
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    More about this item

    Keywords

    Financial crisis House prices Credit crunch Subprime mortgages;

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • C52 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Evaluation, Validation, and Selection

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