Large house price declines can adversely affect macroeconomic performance and financial stability, as seen during the global financial crisis of 2008 and other historical episodes. These macro-financial links arise from the many roles housing plays for households, small firms, and financial intermediaries, as a consumption good, long-term investment, store of wealth, and collateral for lending, among others. In this context, the rapid increase in house prices in many countries in recent years has raised some concerns about the possibility of a decline and its potential consequences.

Contributor Notes

The authors of this chapter are Nico Valckx (team lead), Andrea Deghi, Mitsuru Katagiri, Oksana Khadarina, and Sohaib Shahid, with contributions from Adrian Alter, Eliza-beth Mahoney, Peichu Xie, and Janice Yi Xue, under the guidance of Dong He, Fabio Natalucci, and Claudio Raddatz. Monica Devi and Breanne Rajkumar provided editorial assistance.