Fractures in the housing market

摘要

I often use the housing market to illustrate the two kinds of changes that the economy faces. Type 1 changes are cyclical, more short-lived in nature, and tend to work their way through the economy within a couple of quarters. Type 2 changes are more structural and take longer (years) to both form and unwind. Historically, the housing market was considered a good example of a Type 1 change. The Federal Reserve would lower interest rates in response to either a recession or some other unwanted economic lull; mortgage refinancing and home buying would then reaccelerate. In the 2000s, the credit market for housing underwent a Type 2 shift, which has altered the way it responds to monetary policy. All the easing of credit in the world was not going to spur demand for homeowners who were over-indebted and/or underwater on their mortgages.