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The real estate cycle and the economy: consequences of the Massachusetts boom of 1984-87

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  • Karl E. Case

Abstract

The economy of Massachusetts is in a deep recession. What makes the downturn all the more painful is that it comes on the heels of a period of unprecedented prosperity. What happened? How could a state go from having the lowest unemployment rate in the United States to having the second highest in the space of less than four years? ; Some claim that the current recession is a natural and inevitable downturn after a prolonged expansion and that the region soon will return to a reasonable growth path. Others claim that the state is likely to experience a prolonged period of decline. The thesis of this article is that the dramatic real estate cycle, which began with a housing price boom between 1984 and 1987, was an important element that not only contributed to but also very significantly amplified the economic fortunes and misfortunes of the Commonwealth and the region.

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  • Karl E. Case, 1991. "The real estate cycle and the economy: consequences of the Massachusetts boom of 1984-87," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 37-46.
    • Handle: RePEc:fip:fedbne:y:1991:i:sep:p:37-46
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    References listed on IDEAS

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    1. Karl E. Case & Robert J. Shiller, 1990. "Forecasting Prices and Excess Returns in the Housing Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 18(3), pages 253-273, September.
    2. Edward Moscovitch, 1990. "The downturn in the New England economy: what lies behind it?," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 53-65.
    3. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    4. Karl E. Case, 1986. "The market for single-family homes in the Boston area," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 38-48.
    5. Karl E. Case & Robert J. Shiller, 1988. "The behavior of home buyers in boom and post-boom markets," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 29-46.
    6. Yolanda K. Henderson, 1990. "Defense cutbacks and the New England economy," New England Economic Review, Federal Reserve Bank of Boston, issue Jul, pages 3-24.
    7. Lynn E. Browne, 1989. "Shifting regional fortunes: the wheel turns," New England Economic Review, Federal Reserve Bank of Boston, issue May, pages 27-40.
    8. Skinner, Jonathan, 1989. "Housing wealth and aggregate saving," Regional Science and Urban Economics, Elsevier, vol. 19(2), pages 305-324, May.
    9. Gabriel, Stuart A. & Shack-Marquez, Janice & Wascher, William L., 1992. "Regional house-price dispersion and interregional migration," Journal of Housing Economics, Elsevier, vol. 2(3), pages 235-256, September.
    10. Eric Rosengren, 1990. "How diversified is New England?," New England Economic Review, Federal Reserve Bank of Boston, issue Nov, pages 3-16.
    11. Lynn E. Browne, 1988. "Defense spending and high technology development: national and state issues," New England Economic Review, Federal Reserve Bank of Boston, issue Sep, pages 3-22.
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    1. Case, Karl E. & Mayer, Christopher J., 1996. "Housing price dynamics within a metropolitan area," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 387-407, June.
    2. Tom Nicholas & Anna Scherbina, 2013. "Real Estate Prices During the Roaring Twenties and the Great Depression," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 41(2), pages 278-309, June.
    3. Swamy, Vighneswara, 2017. "Wealth Effects and Macroeconomic Dynamics – Evidence from Indian Economy," MPRA Paper 76836, University Library of Munich, Germany.
    4. Benoit Faye & Éric Le Fur, 2010. "L'étude du lien entre cycle et saisonnalité sur un marché immobilier résidentiel. Le cas de l'habitat ancien à Bordeaux," Revue d'économie régionale et urbaine, Armand Colin, vol. 0(5), pages 937-965.
    5. Vighneswara Swamy, 2019. "Wealth Effects and Macroeconomic Dynamics," Economics Bulletin, AccessEcon, vol. 39(3), pages 1755-1773.
    6. Shi, Shuping, 2017. "Speculative bubbles or market fundamentals? An investigation of US regional housing markets," Economic Modelling, Elsevier, vol. 66(C), pages 101-111.
    7. Lisa Morris Grobar, 1996. "Comparing The New England And Southern California Regional Recessions," Contemporary Economic Policy, Western Economic Association International, vol. 14(3), pages 71-84, July.
    8. Xie, Zixiong & Chen, Shyh-Wei & Wu, An-Chi, 2019. "Asymmetric adjustment, non-linearity and housing price bubbles: New international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).

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    Keywords

    Real property; Massachusetts;

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