Essays on effects of the housing market collapse

The housing market collapse of 2008 had a number of economic effects. Chapter One addresses the history of the AAA financial guaranty insurance industry, which began in the 1980's, grew rapidly in the first few years of the 21st century, but ceased to exist following the housing market collapse. The factors that led to the industry's growth are explored, while the weaknesses that existed in its AAA facade all along are pointed out. This essay concludes that, while the collapse of the housing market was the immediate cause of the financial guaranty industry's downfall, any economic shock would have harmed this highly leveraged industry.;Declines in home values over the past five years have affected many homeowners, decreasing their asset values, and leaving some with negative equity. Besides financial harm, high indebtedness may adversely affect health. Chapter Two looks at the research done to date on the effects of consumer debt and mortgage debt/foreclosure on health.;Chapters Three and Four use different data sets to empirically test the effect of high mortgage loan to home value on a number of health outcomes. Chapter Three employs the Health and Retirement Survey (HRS), a rich, nationally representative sample of the population over 50 years of age and finds significant correlation between high mortgage loan to value and negative health outcomes. Changes in home values are used as an instrument variable to further identify the effect of loan to value on health; results are not conclusive of causality.;Chapter Four uses the NLSY79 to explore the effect of mortgage debt on a younger cohort that, in comparison to the HRS, is more likely to rely on wage income and have lower net worth. Results point to higher loan to value in conjunction with unemployment as having a significant negative impact on health for this cohort, but higher loan to value alone does not significantly affect overall health.;These results point to the need for greater financial literacy for homeowners and potential homeowners, given the more frequent spells of unemployment and the volatility in home prices. Further research with data post 2008 is needed to further test causality.