The housing meltdown: Why did it happen in the United States?

The crisis enveloping global financial markets since August 2007 was triggered by actual and prospective credit losses on US mortgages. Was the United States just unlucky to have been the first to experience a housing crisis? Or was it inherently more susceptible to one? I examine the limited international evidence available, to ask how the boom-bust cycle in the US housing market differed from elsewhere and what the underlying institutional drivers of these differences were. Compared with other countries, the United States seems to have: built up a larger overhang of excess housing supply; experienced a greater easing in...<br<[

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Year of publication:	2008-09-01
Authors:	Ellis, Luci
Institutions:	Bank für Internationalen Zahlungsausgleich <Basel>
Subject:	Wohnungsbau \| Hypothek \| mortgage \| Bodenpreis

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1 Introduction
2 The narrative: what happened differently in the United States
2.1 The construction boom created excess supply
2.2 Lending standards seem to have eased more in the United States
2.3 Arrears rates deteriorated before the economy did
3 Understanding the institutional drivers of the differences
3.1 Supply of new housing is relatively exible
3.2 Tax system encourages higher leverage and ipping
3.3 Legal system is swift but generous to defaulters
3.4 Lenders could rely on external credit scores
3.5 Financial regulation did not prevent riskier lending
3.6 Cash-out renancing is inexpensive in the United States
3.7 Structured nance enabled subprime and other non-conforming lending
4 Concluding remarks and some policy lessons

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