Tuesday, September 30, 2008

Coleman, Lacour-Little and Vandell argue that house prices made sense until 2004

The abstract of their new paper:

The cause of the "housing bubble" associated with the sharp rise and then drop in home prices over the period 1998-2008 has been the focus of significant policy and research attention. The dramatic increase in subprime lending during this period has been broadly blamed for these market dynamics. In this paper we empirically investigate the validity of this hypothesis vs. several other alternative explanations. A model of house price dynamics over the period 1998-2006 is specified and estimated using a cross-sectional time-series data base across 20 metropolitan areas over the period 1998-2006. Results suggest that prior to early 2004, economic fundamentals provide the primary explanation for house price dynamics. Subprime credit activity does not seem to have had much impact on subsequent house price returns at any time during the observation period, although there is strong evidence of a price-boosting effect by investor loans. However, we do find strong evidence that a credit regime shift took place in late 2003, as the GSE's were displaced in the market by private issuers of new mortgage products. Market fundamentals became insignificant in affecting house price returns, and the price-momentum conditions characteristic of a "bubble" were created. Thus, rather than causing the run-up in house prices, the subprime market may well have been a joint product, along with house price increases, (i.e., the "tail") of the changing institutional, political, and regulatory environment characteristic of the period after late 2003 (the "dog").

This result is hardly consistent with the charge that the GSEs were the principal source of the problem. It also says something about having a purely private mortgage market.


Anonymous said...

Given the correlation between the subprime underwriting shift and the bubble timing, perhaps had subprime lending been more tempered, the air in the housing bubble may have hissed out more slowly.

Anonymous said...

[b]selling your software company, [url=http://firgonbares.net/]adobe creative suite 4 master collection torrent[/url]
[url=http://firgonbares.net/][/url] buying macromedia how to install adobe photoshop cs3 on windows xp
Creative Suite [url=http://firgonbares.net/]autocad tutorials[/url] legal to buy oem software
[url=http://firgonbares.net/]coreldraw tutorials[/url] www educational software com
[url=http://firgonbares.net/]nero showtime[/url] adobe photoshop cs3 extended torrent
microsoft office 2003 serial [url=http://firgonbares.net/]microsoft software product[/b]

davelindahl said...

David Lindahl scam report says that the real estate is an ever modifying industry, you should understand the truth of how well you know your real estate market, the simple response to this query is much reference to the point that does the real estate asset provides a lucrative upcoming for you and your family.