Michael Haliassos
- Published in print:
- 2013
- Published Online:
- January 2015
- ISBN:
- 9780262018296
- eISBN:
- 9780262305495
- Item type:
- chapter
- Publisher:
- The MIT Press
- DOI:
- 10.7551/mitpress/9780262018296.003.0004
- Subject:
- Economics and Finance, Financial Economics
It is generally agreed that the crises of the mid-2000s were triggered, in part, by the failures of financial innovation in the housing economy. In relation to the securitisation of mortgages, and ...
More
It is generally agreed that the crises of the mid-2000s were triggered, in part, by the failures of financial innovation in the housing economy. In relation to the securitisation of mortgages, and the growth of markets for collateralised debt obligations and credit default swaps, this may well be true. However, this chapter argues that, in other ways, notably in relation to house price volatility and the management of housing equity, key element of the crisis were less a legacy of innovation than a product of conservatism.Less
It is generally agreed that the crises of the mid-2000s were triggered, in part, by the failures of financial innovation in the housing economy. In relation to the securitisation of mortgages, and the growth of markets for collateralised debt obligations and credit default swaps, this may well be true. However, this chapter argues that, in other ways, notably in relation to house price volatility and the management of housing equity, key element of the crisis were less a legacy of innovation than a product of conservatism.
Geoffrey Meen and Christine Whitehead
- Published in print:
- 2020
- Published Online:
- January 2021
- ISBN:
- 9781529211863
- eISBN:
- 9781529211870
- Item type:
- chapter
- Publisher:
- Policy Press
- DOI:
- 10.1332/policypress/9781529211863.003.0003
- Subject:
- Economics and Finance, Economic Systems
Whatever measure of affordability is used house prices and rents play a central role and Chapter 3 is concerned with what causes these two variables to change over time and vary across different ...
More
Whatever measure of affordability is used house prices and rents play a central role and Chapter 3 is concerned with what causes these two variables to change over time and vary across different parts of the country. Although increases in house prices have been particularly strong in the UK by international standards, other countries are also discussed. In fact, house price trends and volatility can be explained by a fairly small number of variables – and their influence has been remarkably consistent over the last fifty years. The problem has been rather that house prices are very sensitive to changes in incomes, interest rates and credit conditions and these vary greatly over time. Therefore, modest changes in macroeconomic conditions have disproportionate effects on housing. UK empirical work on market rents is less well-developed than for house prices, but the chapter considers the reasons why rents appear to have risen at a slower rate than house prices.Less
Whatever measure of affordability is used house prices and rents play a central role and Chapter 3 is concerned with what causes these two variables to change over time and vary across different parts of the country. Although increases in house prices have been particularly strong in the UK by international standards, other countries are also discussed. In fact, house price trends and volatility can be explained by a fairly small number of variables – and their influence has been remarkably consistent over the last fifty years. The problem has been rather that house prices are very sensitive to changes in incomes, interest rates and credit conditions and these vary greatly over time. Therefore, modest changes in macroeconomic conditions have disproportionate effects on housing. UK empirical work on market rents is less well-developed than for house prices, but the chapter considers the reasons why rents appear to have risen at a slower rate than house prices.
Price Fishback, Jonathan Rose, and Kenneth Snowden
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9780226082448
- eISBN:
- 9780226082585
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226082585.003.0003
- Subject:
- Economics and Finance, Economic History
This chapter describes the foreclosure crisis of the 1930s. Borrower defaults were rooted in the double trigger of reduced incomes and lower house prices, as well as the fragile structure of ...
More
This chapter describes the foreclosure crisis of the 1930s. Borrower defaults were rooted in the double trigger of reduced incomes and lower house prices, as well as the fragile structure of contracts discussed in the previous chapter. The result was a self-reinforcing cycle of foreclosures and weaker house prices. As lenders’ financial positions weakened, the flow of new credit fell to historic lows. By March 1933, the housing and mortgage markets in the U.S. were in a downward spiral with no end in sight.Less
This chapter describes the foreclosure crisis of the 1930s. Borrower defaults were rooted in the double trigger of reduced incomes and lower house prices, as well as the fragile structure of contracts discussed in the previous chapter. The result was a self-reinforcing cycle of foreclosures and weaker house prices. As lenders’ financial positions weakened, the flow of new credit fell to historic lows. By March 1933, the housing and mortgage markets in the U.S. were in a downward spiral with no end in sight.
Geoffrey Meen and Christine Whitehead
- Published in print:
- 2020
- Published Online:
- January 2021
- ISBN:
- 9781529211863
- eISBN:
- 9781529211870
- Item type:
- chapter
- Publisher:
- Policy Press
- DOI:
- 10.1332/policypress/9781529211863.003.0006
- Subject:
- Economics and Finance, Economic Systems
Chapter 6 discusses new house building and the changing structure of the industry. Current housing policy is heavily concerned with ways of increasing supply and, in terms of analysis, the ...
More
Chapter 6 discusses new house building and the changing structure of the industry. Current housing policy is heavily concerned with ways of increasing supply and, in terms of analysis, the responsiveness of construction to changes in house prices is one of the key parameters. If the response is strong, then increases in demand are primarily met by an increase in supply. If the response is weak then demand increases lead to worsening affordability. The response appears to be particularly weak in the UK by international standards. However, the chapter also demonstrates, through simulations, the extent to which it is feasible to improve affordability by increases in house building. To have a significant impact, increases have to be large and sustained, on a scale that has rarely been achieved in the UK in the past.Less
Chapter 6 discusses new house building and the changing structure of the industry. Current housing policy is heavily concerned with ways of increasing supply and, in terms of analysis, the responsiveness of construction to changes in house prices is one of the key parameters. If the response is strong, then increases in demand are primarily met by an increase in supply. If the response is weak then demand increases lead to worsening affordability. The response appears to be particularly weak in the UK by international standards. However, the chapter also demonstrates, through simulations, the extent to which it is feasible to improve affordability by increases in house building. To have a significant impact, increases have to be large and sustained, on a scale that has rarely been achieved in the UK in the past.
Geoffrey Meen and Christine Whitehead
- Published in print:
- 2020
- Published Online:
- January 2021
- ISBN:
- 9781529211863
- eISBN:
- 9781529211870
- Item type:
- book
- Publisher:
- Policy Press
- DOI:
- 10.1332/policypress/9781529211863.001.0001
- Subject:
- Economics and Finance, Economic Systems
Affordability is, perhaps, the greatest housing problem facing households today, both in the UK and internationally. Even though most households are now well housed, hardship is disproportionately ...
More
Affordability is, perhaps, the greatest housing problem facing households today, both in the UK and internationally. Even though most households are now well housed, hardship is disproportionately concentrated among low-income and younger households. Our failure to deal with their problems is what makes housing so frustrating. But, to improve outcomes, we have to understand the complex economic and political forces which underlie their continued prevalence. There are no costless solutions, but there are new policy directions that can be explored in addition to those that have dominated in recent years.
The first, analytic, part of the book considers the factors that determine house prices and rents, household formation and tenure, housing construction and the roles played by housing finance and taxation. The second part turns to examine the impact of past policy and the possibilities for improvement - discussing supply and the impact of planning regulation, supply subsidies, subsidies to low-income tenants and attempts to increase home ownership.
Rather than advocating a particular set of policies, the aim is to consider the balance of policies; the constraints under which housing policy operates; what can realistically be achieved; the structural changes that would need to occur; and the significant sacrifices that would have to be made by some groups if there are to be improvements for others. Our emphasis is on the UK but throughout the book we also draw on international experience and our conclusions have relevance to analysts and policy makers across the developed world.Less
Affordability is, perhaps, the greatest housing problem facing households today, both in the UK and internationally. Even though most households are now well housed, hardship is disproportionately concentrated among low-income and younger households. Our failure to deal with their problems is what makes housing so frustrating. But, to improve outcomes, we have to understand the complex economic and political forces which underlie their continued prevalence. There are no costless solutions, but there are new policy directions that can be explored in addition to those that have dominated in recent years.
The first, analytic, part of the book considers the factors that determine house prices and rents, household formation and tenure, housing construction and the roles played by housing finance and taxation. The second part turns to examine the impact of past policy and the possibilities for improvement - discussing supply and the impact of planning regulation, supply subsidies, subsidies to low-income tenants and attempts to increase home ownership.
Rather than advocating a particular set of policies, the aim is to consider the balance of policies; the constraints under which housing policy operates; what can realistically be achieved; the structural changes that would need to occur; and the significant sacrifices that would have to be made by some groups if there are to be improvements for others. Our emphasis is on the UK but throughout the book we also draw on international experience and our conclusions have relevance to analysts and policy makers across the developed world.
Price Fishback, Jonathan Rose, and Kenneth Snowden
- Published in print:
- 2013
- Published Online:
- May 2014
- ISBN:
- 9780226082448
- eISBN:
- 9780226082585
- Item type:
- chapter
- Publisher:
- University of Chicago Press
- DOI:
- 10.7208/chicago/9780226082585.003.0009
- Subject:
- Economics and Finance, Economic History
The HOLC provided significant relief to individual borrowers and lenders, and also pursued a more general public mission. HOLC officials were determined to stabilize mortgage and housing markets by ...
More
The HOLC provided significant relief to individual borrowers and lenders, and also pursued a more general public mission. HOLC officials were determined to stabilize mortgage and housing markets by interrupting the cycle of foreclosures and price declines that caused a downward spiral in the early 1930s. This chapter describes the findings of an econometric analysis of HOLC activity in local housing markets. The evidence shows that on average the HOLC prevented declines in house prices and home ownership outside the nation’s largest cities between 1930 and 1940, but did not affect construction in those markets. The authors identify these effects by using the location of HOLC offices as a source of randomness affecting the allocation of refinance activity. The effect of the HOLC on markets in larger cities is still an open question.Less
The HOLC provided significant relief to individual borrowers and lenders, and also pursued a more general public mission. HOLC officials were determined to stabilize mortgage and housing markets by interrupting the cycle of foreclosures and price declines that caused a downward spiral in the early 1930s. This chapter describes the findings of an econometric analysis of HOLC activity in local housing markets. The evidence shows that on average the HOLC prevented declines in house prices and home ownership outside the nation’s largest cities between 1930 and 1940, but did not affect construction in those markets. The authors identify these effects by using the location of HOLC offices as a source of randomness affecting the allocation of refinance activity. The effect of the HOLC on markets in larger cities is still an open question.