A Marketing Systems View of the US Housing Crisis

Abstract

The US housing market involves a network of specialized actors servicing the buying and selling of homes. In the years leading to the housing bubble, this network underwent a significant evolution in response to environmental changes. Prior to the bubble, traditional actors such as local banks, savings and loans, Fannie Mae, and Freddie Mac predominated. During the bubble, new actors such as mortgage brokers, investment banks, and institutional investors came to displace the traditional ones. Attention is drawn to the activities of new players in the housing market, to the changed roles of traditional players, and to inactivity among regulators. This article presents an overview of system dynamics in terms of the market actors involved and their interrelationships, which culminated in the bursting of the housing bubble. Although many features of this case are unique, some general lessons for marketing systems can be drawn. Marketing systems can come to be dominated by actors formerly in supporting roles; new system structures can fail to serve customers well; and unfounded assumptions can cloud business and policy decisions.