Housing Market Dynamics: Disequilibrium, Mortgage Default, and Reverse Mortgages

Abstract

The mortgage market collapse which followed the burst of the housing bubble in 2007 led to unprecedented levels of mortgage default, mortgage foreclosure, and housing vacancies. The dramatic increase in mortgage terminations prompted extensive discussions among academics, industry practitioners, regulators, and policymakers. These discussions included such issues as the underlying causes of the mortgage market collapse and the impact of declining house prices on mortgage default and foreclosure. This special issue results from the 2013 FSU-UF Critical Issues Symposium entitled “Housing Market Issues: Initiatives, Policies and the Economy” where the impact of the recent market collapse was examined on topics such as the negative spillover effect of foreclosure, the determinants of mortgage default and prepayment, disequilibrium models of the housing market, and the growth of the reverse mortgage market. This introductory paper serves to set the stage by relating the papers in this special issue to the previous literature. It provides both a clear picture of the state of knowledge in these critical areas and the significant contributions of these recent studies.