Glaeser, Gottlieb, и Gyourko
Conclusion: So What Did Cause the Housing Bubble?
Interest rates do influence house prices, but they cannot provide anything close to a
complete explanation of the great housing market gyrations between 1996 and 2010. Over the
long 1996-2006 boom, they cannot account for more than one-fifth of the rise in house prices.
Their biggest predictive influence is during the 2000-2005 period, when long rates fell by almost
200 basis points. That can account for about 45% of the run-up in home values nationally during
that half-decade span. However, if one is going to cherry-pick time periods, it also must be
noted that falling real rates during the 2006-2008 price bust simply cannot account for the 10%
decline in FHFA indexes those years.
There is no convincing evidence from the data that approval rates or down payment
requirements can explain most or all of the movement in house prices either. The aggregate data
on these variables show no trend increase in approval rates or trend decrease in down payment
requirements during the long boom in prices from 1996-2006. However, the number of
applications and actual borrowers did trend up over this period (and fall sharply during the bust),
which raises the possibility that the nature of the marginal buyer was changing over time.
Carefully controlling for that requires better and different data, so our results need not be the
final word on these two credit market traits.
This leaves us in the uncomfortable position of claiming that one plausible explanation
for the house price boom and bust, the rise and fall of easy credit, cannot account for the majority
of the price changes, without being able to offer a compelling alternative hypothesis. The work
of Case and Shiller (2003) suggests that home buyers had wildly unrealistic expectations about
future price appreciation during the boom. They report that 83 to 95 percent of purchasers in
2003 thought that prices would rise by an average of around 9 percent per year over the next
decade. It is easy to imagine that such exuberance played a significant role in fueling the boom.
Yet, even if Case and Shiller are correct, and over-optimism was critical, this merely
pushes the puzzle back a step. Why were buyers so overly optimistic about prices? Why did
that optimism show up during the early years of the past decade and why did it show up in some
markets but not others? Irrational expectations are clearly not exogenous, so what explains
them? This seems like a pressing topic for future research.
Moreover, since we do not understand the process that creates and sustains irrational
beliefs, we cannot be confident that a different interest rate policy wouldn’t have stopped the
bubble at some earlier stage. It is certainly conceivable that a sharp rise in interest rates in 2004
would have let the air out of the bubble. But this is mere speculation that only highlights the
need for further research focusing on the interplay between bubbles, beliefs and credit market