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The Housing and Credit Bubbles in the US and Europe: A Brief Comparison

Working paper #767
Susan M. Wachter

This paper examines the house price boom that occurred simultaneously in the United States and in a number of European countries in 2003 to 2007. In the United States, Spain, Ireland, the UK, the Netherlands, and Denmark, a house price boom peaked in 2007 and, in each case, was accompanied by a rapid expansion of financing — mortgage lending and mortgage securitization. Were “innovations” in securitization a common cause of the crisis of what was a global cycle? Here we consider the role of financial innovations in securitization along with the incompleteness of real estate markets in the global financial crisis.

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