Crises in the Housing Market: Causes, Consequences, and Policy Lessons

Garriga, Carlos; Hedlund, Aaron

Working Paper

Crises in the Housing Market: Causes, Consequences, and Policy Lessons

Abstract: The global financial crisis of the past decade has shaken the research and policy worlds out of their belief that housing markets are mostly benign and immaterial for understanding economic cycles. Instead, a growing consensus recognizes the central role that housing plays in shaping economic activity, particularly during large boom and bust episodes. This article discusses the latest research regarding the causes, consequences, and policy implications of housing crises with a broad focus that includes empirical and structural analysis, insights from the 2000's experience in the United States, and perspectives from around the globe. Even with the significant degree of heterogeneity in legal environments, institutions, and economic fundamentals over time and across countries, several common themes emerge to guide current and future thinking in this area.

Keywords: housing; mortgages; debt; crisis; foreclosures;

JEL Classification: D31; D83; E21; E22; G11; G12; G21;