Document Type

Working Paper

Publication Date


Working Paper Number

WP #13013, July 2013 revised December 2013


Based on interviews with local real estate agents, this paper develops a spatial model of the housing market to help us understand what caused the US housing to rise and collapse. We study key factors for their role in the rise and collapse of housing prices, such as speculation and lenient financing. The dynamic simulation findings in the paper demonstrate in concrete terms how lenient bank lending practices combined with speculation can lead to increased volatility in housing prices, including sharp rises followed by sudden collapses. The exploratory work in this paper will help us understand housing price volatilities and make policy advice.

JEL Classification

R31, R32, E43

File Format



39 pages

Included in

Economics Commons