Crisis and Innovation in the Housing Economy: A Tale of Three Markets
Crisis and Innovation in the Housing Economy: A Tale of Three Markets
It is generally agreed that the crises of the mid-2000s were triggered, in part, by the failures of financial innovation in the housing economy. In relation to the securitisation of mortgages, and the growth of markets for collateralised debt obligations and credit default swaps, this may well be true. However, this chapter argues that, in other ways, notably in relation to house price volatility and the management of housing equity, key element of the crisis were less a legacy of innovation than a product of conservatism.
Keywords: Housing markets, Mortgage markets, Mortgage equity withdrawal, House price volatility, Equity finance, House price derivatives
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