Geanakoplos, J.,Axtell, R.,Farmer, D. J.,Howitt, P.,Conlee, B.,Goldstein, J.,Hendrey, M.,Palmer, N. M.,Yang, C. Y.
Systemic risk must include the housing market, though economists have not generally focused on it. We begin construction of an agent-based model of the housing market with individual data from Washington, DC. Twenty years of success with agent-based models of mortgage prepayments give us hope that such a model could be useful. Preliminary analysis suggests that the housing boom and bust of 1997-2007 was due in large part to changes in leverage rather than interest rates.