Alternatively understood, this research finding suggests that monetary policy alone may be insufficient to promote a more robust and sustainable improvement in household net worth. Besides the substantial direct losses in the wealth of households through losses in home equity, other housing-related issues have likely been holding back the economic recovery.
The collapse of house prices coincided with a sharp increase in mortgage defaults and foreclosures, leaving financial institutions with large holdings of residential real estate, or REO. As these properties were put up for sale on the market, they contributed to the alreadybloated supply of vacant homes available for sale and put further downward pressure on house prices.