Why did the housing meltdown happen in the United States?

Interesting discussion — not too wonky — on "Why did the housing meltdown happen in the United States?" via this BIS working paper.


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 mortgage lending standards; and ended up with a
household sector more vulnerable to falling housing prices. Some of these
outcomes seem to have been driven by tax, legal and regulatory systems that
encouraged households to increase their leverage and permitted lenders to enable
that development. Given the institutional background, it may have been that the
US housing boom was always more likely to end badly than the booms

Housing construction and vacant homes


US MBS issuance and subprime lending standards


The housing meltdown: Why did it happen in the United States?
Luci Ellis
BIS Working Papers: No 259
Monetary and Economic Department, September 2008

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