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Best Economic Analysis I've Read in a Long time - What’s Different about the Latest Housing Boom?

 One of the best economic anlaysis of the housing boom, bust, and recovery. The version from the FRBSF was not very readable so trying to format and post for my readers here. I will post in different excerpts as time permits with the proper citations. This paper was published by EUVEN GLICK, KEVIN J. LANSING, AND DANIEL MOLITOR

After peaking in 2006, the median U.S. house price fell about 30%, finally hitting bottom in late 2011. Since then, house prices have rebounded strongly and are nearly back to the pre-recession peak. However, conditions in the latest boom appear far less precarious than those in the previous episode. The current run-up exhibits a less-pronounced increase in the house price-to-rent ratio and an outright decline in the household mortgage debt-to-income ratio—a pattern that is not suggestive of a credit-fueled bubble.

Starting in the early 2000s, the U.S. housing market experienced a tremendous boom. House prices, private-sector construction employment, new housing starts, and household mortgage debt all rose in unison. An accommodative interest rate environment combined with lax lending standards, ineffective mortgage regulation, and unchecked growth of loan securitization all helped fuel an overexpansion of consumer borrowing. An influx of new homebuyers with access to easy mortgage credit helped bid up house prices to unprecedented levels relative to rents or disposable income. The run-up, in turn, encouraged lenders to ease credit further on the assumption that house prices would continue to rise. Similarly optimistic homebuilders responded to the price signals and embarked on a record-setting  building spree such that, at one point, the construction sector employed 5.7% of American workers, the highest percentage since 1959.

But  when  the  various  rosy  projection s failed  to  materialize,  t he  housing  bubble  burst,  setting  off  a  c hain  of  defaults  and  financial  institution  failures  that  led  to  a full-blown  economic   crisis.  The  Great  Recession,  which started in December 2007 and ended in June 2009, was the most severe U.S. economic contraction since  1947   as  measured  by  the  peak-to-trough  decline  in  real  GDP.

After peaking in March 2006, the median U.S. house price fell about 30%, finally hitting bottom in November 2011. Since then, the median house price has rebounded strongly and is nearly back to its pre-recession peak. In some parts of the country, house prices have reached all-time highs.
There  is actually a great version now available that you can clearly read here: