Skip to main content
Unpublished Paper
Lessons in Price Stability from the U.S. Real Estate Market Collapse
ExpressO (2010)
  • Andrea J Boyack, George Washington University
Abstract

The U.S. residential housing market collapse illustrates the consequences of ignoring risk while funding mortgage borrowing. Collateral over-valuation was a foundational piece of the crisis. Over the past few decades, secondary markets, securitization, policy and psychology increased the flow of funds into real estate. At the same time, financial market segmentation divorced risk from reward. Increased mortgage capital availability, unmitigated by proper risk allocation, led to real estate price inflation. Social trends and government policies exacerbated both the mortgage capital over-supply and the risk-valuation disconnect.

The Dodd-Frank Act inadequately addresses the underlying asset valuation problem. Federal regulation may support market stability systemically, but micro-level oversight and private rights of action more efficiently and effectively secure responsible mortgage pricing.

Keywords
  • financial crisis,
  • Dodd-Frank Act,
  • mortgage,
  • housing,
  • homeownership,
  • lender,
  • borrower,
  • broker,
  • credit rating agency,
  • securitization,
  • American Dream,
  • real estate,
  • capital market,
  • secondary mortgage market,
  • Fannie Mae,
  • Freddie Mac,
  • government sponsored enterprises,
  • risk,
  • leverage,
  • housing crisis,
  • regulation,
  • foreclosure
Disciplines
Publication Date
August 25, 2010
Citation Information
Andrea J Boyack. "Lessons in Price Stability from the U.S. Real Estate Market Collapse" ExpressO (2010)
Available at: http://works.bepress.com/andrea_boyack/3/