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Friday, November 18, 2011 at 12:00pm
Housing was an important factor contributing to the recent recession and financial crisis. Moreover, the continued weakness in the housing sector is one reason behind the so-far weak recovery. Home prices have declined by over 30 percent from their peaks in early 2006, and are now roughly equal to their levels of mid-2003. Consequently, the value of owner-occupied real estate has fallen by over $6.5 trillion from its 2006 peak through 2011Q2. Because residential real estate comprises roughly half of the assets of households outside the top income decile, these declines in home values have led to significant declines in the wealth of the great majority of households. While debt secured by residential real estate has declined as well, the process of debt reduction started later (in late 2008) and has been more gradual. As a result, the aggregate owners’ equity share of household real estate declined sharply between 2006 and 2009, and since has remained at historically low levels. In this presentation, we explore these dynamics, their sources, and their implications for the housing sector and more general financial and macroeconomic outcomes.
Can’t make it in person? View online at: mediasite.video.cornell.edu/mediasit...d=839c8a9076254d69b6bc3ec7d5cf70511d.