The housing price downturn and its effects – a discussion

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The housing price downturn and its effects – a discussion

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dc.contributor.author Lunde, Jens en_US
dc.date.accessioned 2009-02-04T10:26:13Z
dc.date.available 2009-02-04T10:26:13Z
dc.date.issued 2008-09-23T00:00:00Z en_US
dc.identifier.isbn 9788791889066 en_US
dc.identifier.uri http://hdl.handle.net/10398/7141
dc.description.abstract Housing markets in several countries are suffering. The prolonged and strong housing price rises of recent years have turned around. Historical records suggest that housing price drops may happen slowly but be large. Housing prices continue to fall because capital losses have substituted capital gains, housing equities are falling, and housing price expectations have become negative. Household debt had increased to the same degree as housing prices or even more in some countries. Access to mortgage and credit had improved and lenders used "cruise control” when financing still higher housing market prices. Now, housing demand is further weakened because access to credit has been tightened. During a downturn, owner-occupiers’ housing price risk is increased and a growing number of owners have negative equity and payment troubles. Under these conditions, arrears and foreclosures will be widespread in owner-occupation. The effects on the wider economy of a housing price downturn are discussed. Not only does the lenders’ increased credit risk lead to tightened credit access, losses threaten the banks and can create financial crises. Falling housing prices clearly depress the housing market and housing construction activities and thereby the contribution of residential investments to economic growth, while it is less obvious that average housing consumption and residential investments over the whole cycle are affected. The reduction of non-housing consumption as a result of a wealth effect is a reality for years for depressed owner-occupiers but in the aggregate, the housing wealth effect is more dubious. en_US
dc.format.extent 38 s. en_US
dc.language eng en_US
dc.relation.ispartofseries Working paper;2008-01 en_US
dc.title The housing price downturn and its effects – a discussion en_US
dc.type wp en_US
dc.accessionstatus modt08sep23 nijemo en_US
dc.contributor.corporation Copenhagen Business School. CBS en_US
dc.contributor.department Institut for Finansiering en_US
dc.contributor.departmentshort FI en_US
dc.contributor.departmentuk Department of Finance en_US
dc.contributor.departmentukshort FI en_US
dc.idnumber 9788791889066 en_US
dc.publisher.city København en_US
dc.publisher.year 2008 en_US


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