This paper establishes a theoretical and empirical link between the use of aggressive mortgage lending instruments, such as interest only, negative amortization or subprime, mortgages, and the underlying house prices. Such instruments, which come into existence through innovation or financial...

The present period of financial instability is also likely to become known as the end of an era, an era of economic calm and of policy consensus on how to maintain market stability. After World War II, the federal government operated on the Keynesian principles that the right mix of spending,...

This article describes the causes of the boom and bust in the U.S. housing market, which brought down not just the U.S. financial system but the global economy. How did this vicious cycle begin? How did home prices appreciate so far and so fast? Why did rational investors not recognize and stop...

With private-label mortgage-backed securities (MBS), investors bore default risk; while this risk should have been priced, as systemic risk grew, the pricing of risk did not increase. This paper attempts to explain why this happened. We point to market institutions' incentive misalignments that...

Mounting foreclosures and recent disclosures of abusive lending practices have led many states to adopt new anti-predatory lending laws. Researchers have examined the impact of such laws on credit flows and the cost of credit. This research extends the literature by examining if the market...

This paper studies the impact of foreign buyer taxes on house prices using recent law changes in Canada, Australia, and New Zealand. Counterfactual house prices are estimated for each treated location combining prediction techniques from machine learning with inference methods from the Synthetic...

Biographical note: Susan M. Wachter is Richard B. Worley Professor of Financial Management and Professor of Real Estate and Finance at The Wharton School of the University of Pennsylvania and Professor of City and Regional Planning at PennDesign. She codirects the Penn Institute for Urban...