This chapter discusses how money and credit impact real estate activity. It examines the functions of money, how the money supply interacts with inflation, and the Federal Reserve System's role in controlling the money supply. The chapter also explores how changes in the money supply affect real estate markets and how financial markets contributed to the financial crisis of 2007-2008. It concludes by discussing the savings and loan crisis of the 1980s and the mortgage market collapse of 2007.
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Chapter_3_Real Estate Economics.pdf
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IMPORTANT TERMS AND CONCEPTS
<:ompant,veadvanage
counter-party riu:
deflation
demiltlddepbslt.-
depositO()' inuitucioo
d1;co<mr rat'!
di11nlerr,,~iatio'1
casy-mof!EY pcr1q
fedml fund, rat<e
~rat Open M.,,b,r
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PREVIEW
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fnctJOflal ret«'Or
bani.mg
inllauon
mearure of.-alue
mecl,um of~,change
moral ha1nro'
-o-mar.et
upenuoru
porr~rale
rntrte tequiremrr1lt
te'1>ndi.rymorlc<'ts
~tnndanf of,Men-ed
paymmr
,to~tivalue
l,gflt-mancy policy
Manry and ,:,-e<M have a !1"aJOf eirect on real E$t>"le actrvrry Tu,, chaplfr
expand-' t~ p~ieo, i:,q,lan11tton of «onom,~ princ,ples and the role of the
government:, bye"3111m,og monEy, role,n economic trnn,act1on>. Secbon3.l
discusses t~ fundicms of "'"'"'Y and how 1l i, =~d. ll also examines
;,51,,,i,~,....,~~-- how the money 5Upply rmerai:ts w,th inflanon, and 1li impact on real fstJite
mittets. Section 3.1 fe</"-""S the ,.,,, that the Fedffi!I Reser"" s)"'t~m
c.ontrol2themoneywpply, inan edofttomainlllin economicgrowt!,
a..d fuU E"1ployment, w!U><IUl ,nll.,non Sec:1ton 33 em,ihasnes
the lfflp.ld that ::hanl:'!' in the "'Oflll!'f supply h1ve on real
~te actrv1ty Sett1on 3.4 e-<Jllore. now fm,nc•~I marlie~
..nd thehd~a! Re-~ded cothe f,Mn(idl panic of
2007-2008.The~&Poinrat the ernl ofthe;:;hapte<"
d,scu,ses the S3¥'n«"ald loar1 CS&L) crisi~ of the 1980s
and ,ts SUC<~10r, the mortg~e secoriuet collapse of
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