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  • Open Daily: 10am - 10pm
    Alley-side Pickup: 10am - 7pm

    3038 Hennepin Ave Minneapolis, MN
    612-822-4611

Open Daily: 10am - 10pm | Alley-side Pickup: 10am - 7pm
3038 Hennepin Ave Minneapolis, MN
612-822-4611
Preventing House Price Bubbles: Lessons from the 2006-2012 Bust

Preventing House Price Bubbles: Lessons from the 2006-2012 Bust

Follain, James R.
Giertz, Seth H.

Paperback

Series: Policy Focus Reports

United States Politics

Currently unavailable to order

ISBN10: 1558442855
ISBN13: 9781558442856
Publisher: Lincoln Inst Of Land Pol
Published: Jul 3 2012
Pages: 40
Weight: 0.40
Height: 0.10 Width: 8.30 Depth: 10.80
Language: English

The recent boom and bust in house prices generated widespread fallout, affecting metropolitan areas across the country. But the extent of the damage varied widely, suggesting that local market conditions also played an important role in determining how the crisis played out. As a result, national aggregates were an unreliable guide to both housing performance and the design of policies to mitigate the crisis.

Based on their recent research for the Lincoln Institute, James R. Follain and Seth H. Giertz document how econometric models can be used to address some of the complex issues that have arisen since the house price bust. In particular, these models provide valuable insights into the interrelationships between house price patterns and their drivers--including new drivers that changed the fundamental dynamics of housing markets, such as the size of the distressed real estate inventory, the pace of price appreciation, and the amount of subprime lending.

These changes made policymaking in mid-crisis especially challenging. To illustrate this point, the authors analyze one of the major programs put in place to stem the spread of foreclosures. The Housing Affordable Modification Program (HAMP) was developed in 2007 just as the destructive fallout of the crisis began to appear. Traditional tools for measuring and managing the crisis were insufficient. The design of HAMP thus rested upon a number of critical judgments about borrower and lender behavior made without benefit of strong empirical support. While recognizing the challenges of responding to a bust once it has begun, the authors suggest that attempts to deal with any future crises of this type would benefit from certain different design decisions:

- an initial focus on hardest-hit markets to fine-tune program parameters,

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