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It seems that our nation's largest store of value is almost out of the woods. Ever since the housing boom reached its peak in 2006, prices have fallen upwards of 50% in numerous regions of our country, like Phoenix, Detroit, and Las Vegas. This loss has severely damaged one of the nations largest industries and crushed the majority of Americans purchasing power, impeding the global economic recovery.

After a tumultuous period since the 2007/2008 real estate bubble, the global real estate industry seems to be bouncing back. In a MarketLine report it was noted that the industry is set to grow by a marginal 0.3% over a 5-year period through 2015.

What caused the housing boom of the 2000s? A number of researchers havesuggested that loose monetary policy during the first half of the 2000s was aprimary cause of the substantial run-up in house prices in many countries.However, using a common statistical approach, we find that monetary policywas not the main factor. That should not be surprising: Although low interestrates raise house prices, the increase in prices during the mid-2000s was muchlarger than the historical relationship between the two variables would suggest.Instead, we investigate further the link between the marked loosening in termsand standards for mortgage credit and the most rapid increases in house prices.This link provides some evidence for a story where credit provision and thedemand for housing fed on each other and helped spur the housing boom. Ourwork suggests a greater role for macroprudential regulation rather than monetarypolicy in managing asset price booms.- Jane Dokko, Brian M. Doyle, Michael T. Kiley, Jinill Kim,Shane Sherlund, Jae Sim and Skander Van Den Heuvel