Root Causes of The Housing Bubble

MPRA Paper from University Library of Munich, Germany

Abstract: In this chapter we investigate root causes of the recent U.S. housing bubble which has been caused a serious downturn in U.S. economic growth since autumn of 2008. We propose a simple model of housing markets in order to indicate the possible determinants of recent housing prices. Utilizing the model, we verify a number of hypotheses which have been proposed in the recent literature on the housing bubbles. We suggest that the main causes of the housing bubble from 2000 to 2006 are (i) non-elastic housing supply in the metropolitan areas, and (ii) declines in the mortgage loan rate and the housing premium by the massive mortgage credit expansion. We also suggest that these factors were strongly influenced by policies that governments and the Federal reserve Board performed.

Keywords: Housing bubble; The price-to-rent ratio (search for similar items in EconPapers)
JEL-codes: G10 R11 (search for similar items in EconPapers)
Date: 2009-08-10
New Economics Papers: this item is included in nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:16808

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