Housing and the Monetary Transmission Mechanism

摘要

The housing market seems to be on everybodys mind these days, and for good reason: Developments in the housing market have a major effect on economic activity. For example, as single-family housing starts in the United States dropped from their peak of 1.84 million units in January 2006 to the current level of 1.15 million units, the accompanying contraction in residential investment is estimated to have lowered the growth of gross domestic product over the last four quarters by a full percentage point. The big gains in housing prices we have seen here and in many other countries have raised concerns about what might happen to economic activity if those price gains are reversed. Developments in the housing market can also affect credit markets. In the United States, rising delinquencies of subprime residential mortgages have led to substantial losses to holders of securities backed by those mortgages and to sharp increases in credit spreads for those securities. Furthermore, problems in the subprime mortgage market have led investors to reassess credit risk and risk pricing, thereby widening spreads in general and weakening the balance sheets of some financial institutions. Fortunately, the overall financial system appears to be in good health, and the U.S. banking system is well positioned to withstand stressful market conditions.