I. J. of Business & Management Research
Research Article | 
Residential House Prices, Commercial Real Estate Lending and Bank Failures
Author(s) : Gerald A. Hanweck Sr1, Anthony B. Sanders1 and Gary S. Fissel2
Publisher : FOREX Publication
Published : 30 September 2021
e-ISSN : 2347-4696
Page(s) : 362-384
Abstract
We investigate factors leading to bank failures during and after the Great Recession and banking crisis (2008–2015). The FHFA residential real estate house price index (HPI) for each of the 9 Census regions is used to interact with bank mortgage loans and bank financial statement variables. We find that these variables isolate different regional effects on the likelihood of a bank failing. Since we use changes from region to region, we find that regional location and HPI changes have an effect on banks’ commercial lending activity. Other more traditional and associated factors, like construction and land development lending or multifamily real estate lending, similarly explain bank failures during the main period of the banking crisis. By using this approach we better isolate the relationship between residential house prices and builders’ and land developers’ desire to borrow and the willingness of banks to concentrate portfolio lending in commercial real estate.
Keywords: Bank failures, Construction and land development Lending, Residential HPI, Residential mortgage Lending, Simulation modeling
JEL Classification Codes: G201, G31, G32, R32, R12, C690
Gerald A. Hanweck Sr,Professor of Finance, School of Business, George Mason University, Virginia, USA ; Email: ghanweck@gmu.edu
Anthony B. Sanders,Professor of Finance, School of Business, George Mason University, Virginia, USA
Gary S. Fissel ,Independent Researcher, USA
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Gerald A. Hanweck Sr, Anthony B. Sanders and Gary S. Fissel (2021), Residential House Prices, Commercial Real Estate Lending and Bank Failures. IJBMR 9(3), 362-384. DOI: 10.37391/IJBMR.090314.