Working Paper: NBER ID: w15650
Authors: William N. Goetzmann; Frank Newman
Abstract: This paper quantifies the scale and scope of the commercial real estate mortgage bond market in the period surrounding the 1920s in an attempt to better understand the role of retail mortgage debt in early urban development. In particular, this paper quantifies the size of the market, identifies risk factors affecting the coupon yield spread over Treasuries and utilizes a unique data set to construct a commercial mortgage price index over the period 1926-1935. \n \nA substantial retail appetite for real estate securities during this period may have significantly contributed to a real construction boom, but overly optimistic speculation in these securities may have led to overbuilding. The rapid deterioration of these securities and a near complete drop in issuance show, ex post, that investors were overconfident in building fundamentals during the boom years. The breakdown in the value of real estate securities as collateral assets preceded the crash of 1929 and may have contributed to the fall of asset prices more generally.
Keywords: No keywords provided
JEL Codes: L85; N0; N2
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| substantial retail appetite for real estate securities (R33) | real construction boom (L74) |
| overly optimistic speculation in real estate securities (G24) | overbuilding (L74) |
| overbuilding (L74) | deterioration in the value of real estate securities (R33) |
| deterioration in the value of real estate securities (R33) | near-complete drop in issuance (G33) |
| breakdown in the valuation of real estate securities (G33) | stock market crash of 1929 (G01) |