CFDP 1852

Getting at Systemic Risk via an Agent-Based Model of the Housing Market


Publication Date: March 2012

Pages: 13


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.


Agent based models, Housing prices, Boom and bust, Leverage, Interest rates, Foreclosures, Systemic risk

JEL Classification Codes:  E3, E31 E32, E37, E44, E63, R2, R20, R21, R23, R28, R3, R30, R31, R38

See CFP: 1358