The Rise and Fall of Building and Loans in the U.S., 1920-1940

Abstract

The financial crises of 2008 have inflamed the interest in looking back at the Great Depression and reexamining its causes and consequences. Although unlike the recent financial crises mortgages are not considered as the primary reason for the Great Depression, extensive research from Brocker and Hanes (2013) indicates that the 1920s real estate boom was a major contributor to the severity of the Great Depression. Also, the interventionist policies of the Roosevelt administration followed by the Great Depression triggered some of the significant changes in the US housing market that are still in effect. In this paper, I present information on the growth in institutional lending within the US mortgage market in the 1920s. I outline major structural changes in mortgages, in particular mortgages from Building and Loan Associations (B&Ls), and finally I use data from the balance sheets of B&Ls in the states of New York, Iowa, Wisconsin and North Carolina to examine how building and loan mortgages grew in the 1920s and then estimate the relationship between mortgages and building permits, interest rates and real estate owned assets.