What drove the 2003–2006 house price boom and subsequent collapse? Disentangling competing explanations

John M. Griffin, Samuel Kruger and Gonzalo Maturana

Journal of Financial Economics, 2021, vol. 141, issue 3, 1007-1035

Abstract: Ten years after the financial crisis, the central question of what explains the rise and fall in house prices remains unresolved. We provide a unified framework to examine four excess credit supply variables and three speculation variables that have been proposed in the literature. Credit supply variables, particularly subprime share and worse originator share, strongly relate to future zip-code-level house price changes in the boom and bust, whereas none of the speculation variables consistently relate to house prices within MSAs. Pre-trends, supply elasticity, and depressed areas suggest these relations are not driven by lenders anticipating house price growth.

Keywords: Financial crisis; House price growth; Credit supply; Mortgage misreporting; Housing demand (search for similar items in EconPapers)
JEL-codes: G01 G21 R31 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (10)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jfinec:v:141:y:2021:i:3:p:1007-1035

DOI: 10.1016/j.jfineco.2020.06.014

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