Anatomy of the Beginning of the Housing Boom Across U.S. Metropolitan Areas

We provide novel estimates of the location, timing, magnitude, and determinants of the start of the last U.S. housing boom. The last housing cycle cannot be interpreted as a single, national event, as different markets began to boom across a decade-long period, some of them multiple times. A fundamental factor, income of prospective buyers, can account for half of the initial jump in price growth, while expansion of purchases by underrepresented minorities cannot. The start of the boom also was financed conventionally, not by subprime mortgages. The latter's share did rise sharply over time, but only after a multi-year lag.

Policy-Driven Boom and Bust in the Housing Market: Evidence from Mongolia

This paper examines the effects of a mortgage interest rate subsidy on booms and busts in the housing market by analyzing the Housing Mortgage program in Mongolia. We find that the most recent housing boom in Mongolia occurred from the second quarter (Q2) of 2012 to first quarter (Q1) of 2014, and that the subsequent housing bust lasted 4 years. Both house-specific factors and macroeconomic variables had a significant influence on housing price dynamics. Mortgage interest rate semielasticity and real household income elasticity were estimated as −3 and 1.4, respectively. Dynamic analysis of the estimated vector error correction models suggests that the country’s policy intervention in the mortgage market—introducing an interest rate subsidy on mortgage loans for residential properties of up to 80 square meters—drove the recent housing boom in Mongolia.

Credit Supply and Housing Speculation

Credit supply expansion boosts housing speculation and amplifies the housing cycle. The surge in private-label mortgage securitization in 2003 fueled a large expansion in mortgage credit supply by lenders financed with noncore deposits. Areas more exposed to these lenders experienced a large relative rise in transaction volume driven by a small group of speculators, and these areas simultaneously witnessed an amplified housing boom and bust. Consistent with the importance of belief heterogeneity, house price growth expectations of marginal buyers rose during the boom, while housing market pessimism among the general population increased.

The Financial Transmission of Housing Booms: Evidence from Spain

How does a housing boom affect credit to non-housing firms? Using bank, firm, and loan-level microdata, we show that the Spanish housing boom reduced non-housing credit growth during its first years, but stimulated it later on. These patterns can be rationalized by financial constraints for banks. Constrained banks initially accommodated higher housing credit demand by reducing non-housing credit. Eventually, however, the housing boom increased bank net worth and expanded credit supply. A quantitative model, disciplined by our cross-sectional estimates, indicates that the crowding-out effect was substantial but temporary, and had been fully absorbed by the end of the boom. (JEL E32, E44, G21, R21, R31)