Adam J. Levitin
Susan M. Wachter
University of Pennsylvania – The Wharton School – Real Estate Department
August 31, 2012
Housing Policy Debate, Vol. 23, 2012
U of Penn, Inst for Law & Econ Research Paper No. 12-28
Georgetown Law and Economics Research Paper No. 2114620
Georgetown Public Law Research Paper No. 2114620
Why Housing?
Abstract:
What made housing vulnerable to a bubble? And why has the housing market been so impervious to attempts at resuscitation?
This Article critically reviews the theories of the housing bubble. It argues that housing is unusually susceptible to booms and busts because credit conditions affect demand and because the market is incomplete and difficult to short. Housing market distress transmits to the macroeconomy through a balance sheet channel, a construction channel, and a collateral channel.
Housing is unique as an asset class in that it is both a consumption and investment good. It is also the largest single consumer asset and debt class. Because housing is credit-backed and such a large asset class, failure will impact the financial system itself and pull down the economy as a whole. The dual-use of housing, its ubiquity on consumer balance sheets, its highly correlated pricing, and its linkage to the macroeconomy make it a particularly painful type of asset bubble to deflate.
The credit-backed nature of housing is also the key to understanding why there was a bubble. We argue that the bubble must be understood as stemming from the change in the mortgage financing channel from Agency securitization to private-label securitization (PLS). This shift enabled financial intermediaries — economic, but not legal agents of borrowers and investors — to exploit the information problems inherent in PLS for their own short-term gain. In other words, a set of agency problems in financial intermediation was the critical factor in fomenting the housing bubble.
Copy of paper below…
~
4closureFraud.org
~
Everyone, why did they choose housing to play the market with? we need roofs over our head and our children need to get to school safe. this has created such strife in our communities. with all the lowered property values due to so many foreclosures school systems have been forced to cut. they would never cut there own salaries (i am not talking about teachers or scool adminstrators) tey need theri life styles but what I am findin my area hernando county florida is the budget cuts affecting our cildrens safety. this county is semi rural. some of the 5 high schools in the county 45 miles north of tampa only 2 are in a suburban area with adequate side walks and street lights for the chilren of ALL ages to walk or ride bikes to school safely. as we speak they are putting side walks in two of the semi rural area high schools. The one my children in 9th and 10th grade attend was built on a mani highway with cars driving over 60mph. there is NO side walks ot street lights and scool starts at 730am and when teh time change occurs puts my kids walking to school in complete darkness. i work 1 hour away and start at 730am. The school to cut buget last year took scool buses away if you live 2 miles or closer and then this year changed school time form 930am to 730a to save “800k”. Instead of excluding our school because of the unusual circumstances of it being built in the middle of no where and no adequate of safe way for the kids to walk to school. the school board, the superintendnet and the florida department od education will not budge and help my kids. I wrote jimmie smith and richard nugent our congressional representative with of course no emial or phone call back. i am getting ready next week to write the senators of florida and then rick scott and pam bondi, i will then move on to washington. This crisis I am sorry should not affected our childrens safety or they should have made provisions to exclude our school as I asked when I got up at the school board meeting and spoke. They discussed the assistant super intendents position for over 25 min or more minutes a school board member was opposed to this position and then when he felt no one listening to him got up ans left. the school board decided to continue the meeting because they had their quarum. whne they got to the time issue, change the time from 730 to 930 there was 5 in discussion. This may not be directly related to foreclosures but if the budgets were not having to be cut because of all these frauds our children would be safe. of course the county could have chosen to cut somewhere else. our neighbor citrus county did just that. these northern counties have semi rural areas. the school boards should take that into considertion. citrus cut other places and left their 1 1/2 mile fro the school bus rule intact. herando chose to cut our childrens buses and chaneg school. times to save monwy with out regard to our childrens safety. this is an outrage. I would suggest everyone readign this post call 352-797-7000 or 352-797-7003 and leave messages on how its an outrage choosing to save money over childrens safety. that any high school built in a semmi rural area with out safe provisions for students to get safely to and from school should provide their students with a bus. this is an outrage. yet forclsoures all over the country continue with no abatement. our CONgress has been bought and sold. notice our gas proces. i am not good at research bit if someone would like to research how many and who in CONgress own stock in the oil compnaies i would guarantee 99.9% do, including the president. I thnk this is a conflict of intrest is causing us to use more money monthly on gas then food also with no abatement. this is also an out rage people. we need some releif we need some action. somehow someway.
No one is above the law. Their ponzi scheme crapped out in 2008 when they robbed us. That was the biggest robbery and transfer of our wealth in history. They are continuing to bailout these crooks and rob the American people for a quadrillion dollars in insolvent derivatives fraud the FED committed with our signatures by RE SOCIALIZING THEIR DEBT UPON THE AMERICAN PEOPLE. THAT IS COMPLETE COMMUNISM BY FASCISM. Time to make the criminals pay US back.
Inside job is right. It is of some comfort to see academics, refrain in political correctness, from describing some of the status quo as outright antisocial, greedy, immoral predators. I would suppose this tact is more persuasive, since the reverse could be claimed of the little fish, and their “greed” for decent. affordable housing.
Contrast these efforts with other so-called academics who celebrate the Banksters wrath on the middle class. Todd J. Zywicki comes to mind, with his infamous “victimless crime” crock.