19. How Housing Busts End: Home Prices, User Cost, and Rigidities During Down Cycles

  1. Susan J. Smith Mistress Professor Director Fellow Editor-in-Chief3 and
  2. Beverley A. Searle PhD Lecturer4
  1. Karl E. Case BA, PhD Professor member1 and
  2. John M. Quigley Professor2

Published Online: 29 APR 2010

DOI: 10.1002/9781444317978.ch19

The Blackwell Companion to the Economics of Housing: The Housing Wealth of Nations

The Blackwell Companion to the Economics of Housing: The Housing Wealth of Nations

How to Cite

Case, K. E. and Quigley, J. M. (2010) How Housing Busts End: Home Prices, User Cost, and Rigidities During Down Cycles, in The Blackwell Companion to the Economics of Housing: The Housing Wealth of Nations (eds S. J. Smith and B. A. Searle), Wiley-Blackwell, Oxford, UK. doi: 10.1002/9781444317978.ch19

Editor Information

  1. 3

    University of Cambridge, UK

  2. 4

    Durham University, UK

Author Information

  1. 1

    Wellesley College, USA

  2. 2

    University of California, Berkeley, USA

Publication History

  1. Published Online: 29 APR 2010
  2. Published Print: 12 MAR 2010

ISBN Information

Print ISBN: 9781405192156

Online ISBN: 9781444317978

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Keywords:

  • boom-and-bust cycle;
  • home prices;
  • housing market;
  • national balance sheet;
  • relaxed mortgage;
  • USA

Summary

This chapter focuses on the housing market and home prices. It presents a quantitative history of the movement of home prices in the USA between 1975 and 2008, including the impact of the boom-and-bust cycle of 2000-2008 on the national balance sheet, as well as the historical relationship between home prices and household income over the cycle. The chapter describes the traditional process of disequilibrium adjustment which is unique to the housing market, and which has played itself out during every previous recovery period. It presents a perspective that helps integrate the effects of the important, but seemingly disparate, aspects of the current housing crisis in the USA. These aspects include home price changes, expectations about price changes, the demand for housing, and the diffusion of relaxed mortgage underwriting standards in the USA during the period leading up to the crash in the housing market.

Controlled Vocabulary Terms

balance sheet; Business cycle; housing; Mortgage loan