Mastering the metropolis through research and thought leadership.
Working Papers

Housing’s Changing Role in the Business Cycle

Working paper #472
Susan M. Wachter and Mark Zandi

Residential real estate has been the cornerstone of the recent economic recovery. One-third of the economy’s growth since the start of the decade can be attributed to housing and mortgage market activity. During this period, home equity increased by $4 billion, thus counterbalancing for losses experienced in the recent bear market. Without the strong housing and mortgage markets, the overall economy would have experienced a decline and might still be near recession.

Housing and mortgage markets have rarely dampened an economic downturn in the past. Indeed, in every other downturn in the nation’s history, housing markets have exacerbated the economy’s basic problems. The new counter-cyclical behavior of the housing and mortgage markets is due to a number of factors, most important among them mortgage rates at or near 50-year lows. Mortgage rates cannot fall indefinitely and will likely rise with continued improvement in the economy, and housing and mortgage markets will therefore cool going forward. While these markets will cool, they will not collapse due to the integration of the U.S. mortgage market with global capital markets through the secondary market. The availability of fixed-rate mortgages has also increased as a result of the secondary market, thereby helping homeowners weather future increases in interest rates.

Download full paper · 1MB PDF

In This Section
Explore Topics

1010 Affordable Housing Amazon Amenitization Architecture Artificial Intelligence Asia Australia automation Autonomous Vehicles bonds Borrowing Constraints Brexit California Canada Capital Business China Co-Working Environment coastal markets cold storage Colombia Commercial Brokerage Commercial Real Estate commissions Congestion consumer bias covid-19 CRE credit card market Credit Default Swaps Credit Insurance Credit Risk Transfers Culture Data Analytics data centers Data Collection Technology Debt Market Demand Demographics Density Development Discrete Choice disruption Diversity drones e-Commerce Economic Corridors economic policy economics education election studies Equity Funds Equity Market Ethnic Factors Europe Fannie Mae financial asset management Foreclosures Foreign Policy France Freddie Mac general equilibrium Global global economy Global Financial Crisis Globalization great depression Great Recession healthy buildings Hedonic hospitality Housing & Residential housing boom Housing Disease housing prices Housing Supply Identity Income Inequality India inflation Inter-generational mobility interest rates Investing jobs labor market Lagging Regions land use regulation Language life sciences Macroeconomics malls Market Pricing megacities Microeconomics Migration Minimum Payments Mixed-Use Mobility moral hazard mortgage insurance mortgage market Mortgage Rates Mortgages Multi-family Nation Building Non-Traditional Mortgages Office Market office sector pension funds Placed Based Policies Political Risk Price Discovery Private Equity Business public health public policy Public Schools real estate brokerage Real Estate Investment Real Estate Investment Trusts Recession Rental Retail Retirement reverse mortgages Risk Adjustment risk management risk-shifting robotics single family housing Slums Sorting South America Spatial Regions spillover effect stimulus package Sub-Prime Mortgages Supply Chains Sustainability Technology telecommunications trade transportation unemployment United States Urban Urbanization Warehouse welfare work from home