Scholars assess the factors that led to housing meltdown
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CAMBRIDGE, Mass. (April 17, 2009) – The interplay of risk and regulation set the stage for the burst U.S. housing bubble and associated financial crisis linked to the contagion effects of subprime mortgages and their securitized investment vehicles, according to contributors to a new volume published by the Lincoln Institute of Land Policy.
Housing Markets and the Economy: Risk, Regulation, and Policy (2009 / 432 pages / Paper / $35.00 / ISBN: 978-1-55844-184-2), edited by Edward L. Glaeser and John M. Quigley, is based on a 2007 Lincoln Institute conference, “Housing and the Built Environment: Access, Finance, Policy,” held in honor of Karl “Chip” Case, an influential economist at Wellesley College and a former member of the Institute’s board of directors. Case is renowned for his scientific contributions to the economics of housing, his analytical contributions to public policy, and his formulation with Robert Shiller of the repeat-sales price index for housing, the Case-Shiller Index.
While the extension of credit to poorly qualified customers played a role in the run-up to the housing meltdown, so too did land and housing policy at the local level, writes Lincoln Institute president Gregory K. Ingram in the foreword. “Housing market restrictions may have contributed to the widespread misconception that housing prices ‘could not go down.’ ”
In the introduction, Edward Glaeser and John Quigley, economics professors at Harvard and the University of California, Berkeley respectively, and two of the nation’s leading authorities on housing and regulation, note that real estate is a $20 trillion market, and homeowners must confront the risk inherent in having so much wealth tied to a single volatile asset – their home.
The focus of the analysis is risk in the housing market, the regulation of housing markets by government, and other critical issues in U.S. housing policy. Contributors assess the way that home ownership entails financial risk as well as rewards, the advance of derivative markets, and the role that home equity insurance can play in reducing risk.
Other factors examined in the volume include the role that the regulation of government-sponsored enterprises have played in extending credit to home purchasers in low-income neighborhoods, and the associated growth in the market for subprime mortgages; the unintended consequences of low-income tax credit programs for housing construction; and the impact of local zoning regulations on new construction and housing prices.
The volume also explores derivatives markets and home prices, subprime mortgages, the Community Reinvestment Act, and the extent of competition among real estate agents. A postscript by David Warsh, former columnist for The Boston Globe and author of the blog Economic Principals, celebrates the legacy and influence of Case.
Michael H. Schill, dean and professor of law at the University of California, Los Angeles, notes in praise of Housing Markets and the Economy that “at no time in our history since the Great Depression has an understanding of the housing market been so critical. This book provides authoritative analyses of subjects ranging from the risk of housing price fluctuations to the crisis of subprime loans. These contributions will have lasting impact on public policy and on housing scholarship for years to come.”
About the Editors
Edward L. Glaeser is Fred and Eleanor Glimp Professor of Economics, director of the Taubman Center for State and Local Government, and director of the Rappaport Institute of Greater Boston, all at Harvard University. He is also research associate at the National Bureau of Economic Research in Cambridge, Massachusetts.
John Quigley is I. Donald Terner Distinguished Professor and professor of economics at the University of California, Berkeley. He also holds appointments in the Goldman School of Public Policy and the Haas School of Business and directs the Berkeley Program on Housing and Urban Policy.
For review copies, please contact Anthony Flint at email@example.com. The Lincoln Institute of Land Policy www.lincolninst.edu is a leading resource for key issues concerning the use, regulation, and taxation of land. Providing high-quality education and research, the Lincoln Institute strives to improve public dialogue and decisions about land policy.