NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Lessons from the Great American Real Estate Boom and Bust of the 1920s

Eugene N. White

Chapter in NBER book Housing and Mortgage Markets in Historical Perspective (2014), Eugene N. White, Kenneth Snowden, and Price Fishback, editors (p. 115 - 158)
Conference held September 23-24, 2011
Published in July 2014 by University of Chicago Press
© 2014 by the National Bureau of Economic Research

Although long obscured by the Great Depression, the nationwide housing “bubble” that appeared in the early 1920s and burst in 1926 was similar in magnitude to the recent real estate boom and bust. Fundamentals, including a post-World War I construction catch-up, low interest rates and a “Greenspan put,” helped to ignite the boom in the twenties, but alternative monetary policies would have only dampened not eliminated it. Both booms were accompanied by securitization, a reduction in lending standards, and weaker supervision. Yet, in contrast to the recent crisis, the bust in the twenties, which drove up foreclosures, did not induce a collapse of the banking system because incentives to financial institutions induced them to limit leverage and the accumulation of mortgage debt on their balance sheets.

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This paper was revised on June 4, 2013

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This chapter first appeared as NBER working paper w15573, Lessons from the Great American Real Estate Boom and Bust of the 1920s, Eugene N. White
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