The phenomenon of “irrational exuberance” around housing prices is now well established as a driving force of housing bubbles. However, the roles of credit supply and the mispricing of credit are less well understood. This article, discusses the recent literature on the relationship between credit supply and housing prices in national and local markets, with a view to identifying gaps in understanding this relationship as well as the implications of these gaps for the ability of market participants and regulators to detect systemic risk. This article connects the literature to the articles in this special issue, which emphasizes the importance of understanding local market conditions, including ways in which housing finance affects and is in turn affected by local markets.
AdelinoManuelSchoarAntoinetteSeverinoFelipe. 2011. “Credit Supply and House Prices: Evidence from Mortgage Market Segmentation.” Social Science Research Network Working Papers. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1787252. Accessed November 14, 2014.
2.
AnundsenAndré K.Heebøll-ChristensenChristian. 2013. Supply Restrictions, Subprime Lending and Regional US Housing Prices. Memorandum, 04. Oslo, Norway: Department of Economics, University of Oslo.
3.
AnundsenAndré K.JansenEilev S.. 2013. “Self-reinforcing Effects between Housing Prices and Credit.” Journal of Housing Economics22:192–212.
4.
BarakovaIrinaCalemPaulWachterSusan M.. 2014. “Borrowing Constraints during the Housing Bubble.” Journal of Housing Economics24:4–20.
5.
BerlinghieriLaura. 2012. “Essays on House Price Fluctuations in the U.S.” PhD diss., University of Washington, Seattle, WA.
6.
BruecknerJan K.CalemPaulNakamuraLeonard I.. 2012. “Subprime Mortgages and the Housing Bubble.” Journal of Urban Economics17:230–43.
7.
CaseKarl E.QuigleyJohn M.ShillerRobert J.. 2011. “Wealth Effects Revisited 1978–2009.” National Bureau of Economic Research Working Papers 16848. http://www.nber.org/papers/w16848.pdf. Accessed November 14, 2014.
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ColemanMajorLaCour-LittleMichaelVandellKerry D.. 2008. “Subprime Lending and the Housing Bubble: Tail Wags Dog?” Journal of Housing Economics17:272–90.
9.
DavidsonAdamLevinAlexWachterSusan. 2014. “Mortgage Default Option Mispricing and Borrower Cost Procyclicality.” In Homeownership Built to Last: Balancing Access, Affordability, and Risk after the Housing Crisis, edited by BelskyEric S.HerbertChristopher E.MolinskyJennifer H.290–316. Cambridge, MA: Brookings Institution Press.
10.
FavilukisJackLudvigsonSydneyNieuwerburghStijn Van. 2012. “The Macroeconomic Effects of Housing Wealth, Housing Finance, and Limited Risk-sharing in General Equilibrium.” New York University Working Paper, New York, NY.
FollainJames R.GiertzSeth H.. 2014. “U.S. House Price Bubbles and Busts: Implications for Property Taxation.” Public Finance Review11:47–66.
13.
FollainJames R.SklarzMike. 2005. “Pricing of Market Specific Bubbles.” Mortgage Banking, October, 2005:158.
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FooteChristopher L.GerardiKristopher S.WillenPaul S.. 2011. “Reasonable People Did Disagree: Optimism and Pessimism about the U.S. Housing Market before the Crash.” In The American Mortgage System: Crisis and Reform, edited by WachterSusan M.SmithMarvin M., 26–59. Philadelphia: University of Pennsylvania Press.
15.
FooteChristopher L.GerardiKristopher S.WillenPaul S.. 2012. “Why Did So Many People Make So Many Ex Post Bad Decisions? The Causes of the Foreclosure Crisis.” Federal Reserve Bank of Boston Working Paper, Boston, MA.
GlaeserEdward L.GottliebJoshua D.GyourkoJoseph. 2010. “Can Cheap Credit Explain the Housing Boom?” National Bureau of Economic Research Working Paper, Cambridge, MA.
18.
GoodmanAllen C.ThibodeauThomas G.2008. “Where are the speculative bubbles in US housing markets?” Journal of Housing Economics, 17:117–37.
19.
GortonGary. 2009. “Information, Liquidity, and the (Ongoing) Panic of 2007.” The American Economic Review99:567–72.
20.
HerringRichard J.WachterSusan M.. 2000. “Real Estate Booms and Banking Busts.” Wharton Real Estate Review, 4(1):32–50.
21.
HerringRichard J.WachterSusan M.. 2003. “Bubbles in Real Estate Markets.” In Asset Price Bubbles: The Implications for Monetary, Regulatory, and International Policies, edited by HunterWilliam C.KaufmanGeorge G.PomerleanoMichael, 217–230. Cambridge, MA: MIT Press.
22.
HimmelbergCharlesMayerChristopherSinaiTodd. 2005. “Assessing High House Prices: Bubbles, Fundamentals, and Misperceptions.” The Journal of Economic Perspectives19:67–72.
23.
JurgilasMariusLansingKevin J.. 2013. “Housing Bubbles and Expected Returns to Homeownership: Lessons and Policy Implications.” In Property Prices and Real Estate Financing in a Turbulent World, edited by BallingMortenBergJesper, 101–23. SUERF - the European Money and Finance Forum, Vienna, Austria.
24.
LeamerEdward E.2003. “Bubble Trouble? Your Home Has a P/E Ratio Too.” UCLA Anderson Forecast. Los Angeles, CA: University of California, Los Angeles.
25.
LevitinAdam J.PavlovAndrey D.WachterSusan M.. 2012. “The Dodd-Frank Act and Housing Finance: Can It Restore Private Risk Capital to the Securitization Market?” Yale Journal on Regulation29:155–80.
26.
LevitinAdam J.WachterSusan M.. 2011. “Information Failure and the U.S. Mortgage Crisis.” In The American Mortgage System: Crisis and Reform, edited by WachterSusan M.SmithMarvin M., 243–70. Philadelphia: University of Pennsylvania Press.
27.
LevitinAdam J.WachterSusan M.. 2012. “Explaining the Housing Bubble.” Georgetown Law Journal100:1177–258.
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LevitinAdam J.WachterSusan M.. 2013. “Why Housing?” Housing Policy Debate23:5–27.
29.
MianAtifSufiAmir. 2014. House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again. Chicago: The University of Chicago Press.
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PavlovAndrey D.WachterSusan M.. 2009a. “Mortgage Put Options and Real Estate Markets.” The Journal of Real Estate Finance and Economics38:89–103.
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PavlovAndrey D.WachterSusan M.. 2009b. “Systemic Risk and Market Institutions.” Yale Journal on Regulation26:445–55.
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PavlovAndrey D.WachterSusan M.. 2011. “Subprime Lending and Real Estate Prices.” Real Estate Economics39:1–17.
33.
PavlovAndrey D.WachterSusan M.ZevelevAlbert A.. forthcoming. “Transparency in the Mortgage Market.” Journal of Financial Services Research.
34.
ReddySudeep. 2011. “Fed Felt Hamstrung by 2005 Housing Bubble.” The Wall Street Journal, January 15, 2011: A4.
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RoubiniNouriel. 913, 2007. The Risk of a U.S. Hard Landing and Implications for the Global Economy and Financial Markets. Transcript of IMF Seminar. Washington, DC: International Monetary Fund. http://www.imf.org/external/np/tr/2007/tr070913.htm. Accessed Nov 14, 2014.
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ZuckermanGregory. 2008. “Trader Made Billions on Subprime.” The Wall Street Journal, January 15, 2008: A1, A10.
