Working Paper: NBER ID: w18852
Authors: Michael Brocker; Christopher Hanes
Abstract: In the 1929-1933 downturn of the Great Depression, house values and homeownership rates fell more, and mortgage foreclosure rates were higher, in cities that had experienced relatively high rates of house construction in the residential real-estate boom of the mid-1920s. Across the 1920s, boom cities had seen the biggest increases in house values and homeownership rates. These patterns suggest that the mid-1920s boom contributed to the depth of the Great Depression through wealth and financial effects of falling house values. Also, they are very similar to cross-sectional patterns across metro areas around 2006.
Keywords: real estate boom; Great Depression; housing market; mortgage foreclosure
JEL Codes: N1; N22; R31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| mid-1920s housing boom (N92) | declines in house values (R31) |
| mid-1920s housing boom (N92) | increases in mortgage foreclosures (G21) |
| declines in house values (R31) | depth of the Great Depression (N12) |
| mid-1920s housing boom (N92) | financial distress in cities (G33) |
| higher rates of foreclosure (G21) | declining values (D46) |
| extent of construction during the boom (L74) | higher rates of foreclosure (G21) |
| extent of construction during the boom (L74) | declining values (D46) |