A Century of Instability in Housing Finance in the United States

Abstract

The U.S. housing sector, including housing starts, house purchasing, and the institutions involved in financing house purchases, has been unstable for most of the past century. We divide the years since 1920 into periods and study the instability for each period. We found that there was no Golden Age of stability in the sector. Instead, the time intervals that we studied were each characterized by metrics of instability that were equal within a reasonable margin of error. These results imply that the U.S. has built a stock of housing and has succeeded in making home ownership an attainable dream, but that accomplishment is overshadowed by the frequent booms and busts. In a second paper we intend to examine the effects on economic growth and recessions that have been associated with the instability in the housing sector. The social costs of instability have been large, and our estimate will be intended to provoke debate and further research.