A Crisis of What? Mortgage Credit Markets and the Social Policy of Promoting Homeownership in the United States and in Europe *

Abstract

The crisis of 2007-09 was prefigured by bubbles in the housing and mortgage credit markets of major Organisation for Economic Co-operation and Development (OECD) countries. A comparison of the United States, the United Kingdom, and France reveals that, contrary to popular perception, the two European countries had a bigger housing price bubble, more volatility, and a more short-termist mortgage market. Yet, the fallout of the crisis—in terms of overindebtedness of mortgage holders, foreclosures of homes, and the extent to which the “nest-eggs” of households were devalued—has been worse in the United States. This article explores which differences in the use of credit markets for the social policy of promoting homeownership can account for this puzzling finding.