This paper compares housing markets and housing finance institutions worldwide to better understand how economic, historical, regulatory and institutional factors influenced national economies and global housing markets during the financial crisis. By reviewing a range of country settings and experiences, we seek to highlight significant characteristics of the U.S. housing market and finance system. The U.S. mortgage system is complex, compared with systems in other countries. It offers a wide range of loan choices for borrowers and a variety of capital sources for lenders. About two-thirds of U.S. households own their homes, similar to rates found in many other parts of the world, but the U.S. government’s role in housing production is relatively small. The U.S. housing finance system stands out for having a mortgage interest tax deduction, a relatively high proportion of long-term fixed rate loans, no fees for mortgage pre-payment, and a predominance of non-recourse loans (mortgages secured only by the house and not the borrower’s other assets). European countries illustrate the range of housing market experiences in the context of the forces that brought on the U.S. housing and financial crisis. The German housing market – with a homeownership rate of only 43 percent, extensive social housing, limited homeownership subsidies and shifting demographics – showed little growth or price declines over the past decade. In Germany and Denmark, covered bonds provided a steady source of credit for home purchases while limiting leverage and other types of risk. The housing boom in the U.K. had features similar to the crack in the U.S. (e.g., self-certified loans, buy-to-let lending), but the aftermath was less severe.

The government intervention to shore up troubled banks and help struggling borrowers, in some cases through new rental arrangements, was swift. Ireland’s housing boom and bust – made worse by massive capital inflows, trade exposure and negative real interest rates – came closer to matching the U.S. experience in severity. Spain was severely hurt by economic linkages to other countries, mostly in the form of foreign demand for vacation homes, and by risk-taking on the part of small local savings institutions. The Asian countries reviewed in this paper avoided the typical full boom-bust cycle. Continuing economic stagnation in Japan caused virtually no significant volatility in that country’s housing market. The impact of the financial crisis on Japan came instead through the severe contraction of international trade and the negative shocks felt through global credit markets. China and Singapore used government control and land ownership to alternately dampen surging prices or stimulate the market, sometimes with little success.