The excesses of the historic US housing cycle of the 2000s were concentrated in the Metropolitan Statistical Areas (MSAs) of Arizona, California, Florida and Nevada. Even controlling for leading explanations of this housing cycle, these Sand State MSAs had more than double the mortgage...

Motivated by the recent subprime mortgage crisis, we explore whether speculative bubble models of equity based on investor disagreement and short-sales constraints can also provide an explanation for the overvaluation of debt contracts. We find that this is unlikely. Equity bubbles are loud:...