Post by Sapphire Capital on Dec 17, 2008 22:05:25 GMT 4
The Housing Meltdown: Why Did it Happen in the United States?
Luci Ellis
Reserve Bank of Australia; Bank for International Settlements (BIS)
September 2008
BIS Working Paper No. 259
Abstract:
The crisis enveloping global financial markets since August 2007 was triggered by actual and prospective credit losses on US mortgages. Was the United States just unlucky to have been the first to experience a housing crisis? Or was it inherently more susceptible to one? I examine the limited international evidence available, to ask how the boom-bust cycle in the US housing market differed from elsewhere and what the underlying institutional drivers of these differences were. Compared with other countries, the United States seems to have: built up a larger overhang of excess housing supply; experienced a greater easing in mortgage lending standards; and ended up with a household sector more vulnerable to falling housing prices. Some of these outcomes seem to have been driven by tax, legal and regulatory systems that encouraged households to increase their leverage and permitted lenders to enable that development. Given the institutional background, it may have been that the US housing boom was always more likely to end badly than the booms elsewhere.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1307629_code456443.pdf?abstractid=1307629&mirid=1
Luci Ellis
Reserve Bank of Australia; Bank for International Settlements (BIS)
September 2008
BIS Working Paper No. 259
Abstract:
The crisis enveloping global financial markets since August 2007 was triggered by actual and prospective credit losses on US mortgages. Was the United States just unlucky to have been the first to experience a housing crisis? Or was it inherently more susceptible to one? I examine the limited international evidence available, to ask how the boom-bust cycle in the US housing market differed from elsewhere and what the underlying institutional drivers of these differences were. Compared with other countries, the United States seems to have: built up a larger overhang of excess housing supply; experienced a greater easing in mortgage lending standards; and ended up with a household sector more vulnerable to falling housing prices. Some of these outcomes seem to have been driven by tax, legal and regulatory systems that encouraged households to increase their leverage and permitted lenders to enable that development. Given the institutional background, it may have been that the US housing boom was always more likely to end badly than the booms elsewhere.
papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID1307629_code456443.pdf?abstractid=1307629&mirid=1