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Hello, my name is Jaime Luque,
Associate Professor at ESCP Europe.
Before this, between 2012 to 2018,
I was faculty at
the University of Wisconsin-Madison School of Business in the real estate department.
Today we are going to talk about
a very interesting topic which is real estate crisis and economic inequality.
As we know, economic inequality has increased a lot in the last decades.
We are going to argue today that it has to do with the role of
debt and the evolution of the real estate sector.
Most of this material are based on two seminal academic contributions,
one is the academic paper by Prof. Steve Malpezzi,
Residential Real Estate in the US Financial Crisis,
the Great Recession, and their Aftermath.
The second source is the book by Mian and Sufi,
House of Debt by the Chicago University Press.
I highly recommend these two sources.
I'm going to start with a fact today.
Between 2000 and 2007 the amount of borrowing doubled to 14 trillion.
That rose steadily, and after that,
in 2007, we saw a sharp change, the level occurred.
Mian and Sufi called the period between 2007 to 2010, the Great Depression.
This slide we have seen in the previous lecture but I'm going to show it again just to get
a sense how leveraging and deleveraging occurs before and after the crisis.
The red line is the amount of household mortgages that increased from the early '90s.
Much steeper path starting from early 2000,
and starts to decrease in 2007,
and it went down almost to 2014.
This is the leveraging and deleveraging that we were discussing.
We are going to make sense of this and it's
relationship with economic inequality the next slide.