Role of the Community Reinvestment Act in Mortgage Supply and the U.S. Housing Boom

Between 1998 and 2006, house prices in the United States rose by about 90 percent but subsequently experienced a sharp decline by about a third until 2010. These house‐​price developments helped fuel enormous financial instability, large‐​scale output losses in many countries around the world, and the collapse or near collapse of numerous financial institutions. Most academic research has focused on the role of credit‐​market conditions in this boom‐​bust cycle, including short‐​term interest rates that were too low for too long, a global saving glut, branching deregulation of the banking industry, and the securitization wave. These resulted in lax credit conditions that boosted credit supply and housing demand and consequently generated the sharp rise in house prices in the United States.