I rather enjoy those trivial, noncontroversial posts. They are easier to write and subsequently defend, since there are no objections.
How High Gas Prices Triggered the Housing Crisis: Theory and Empirical Evidence, by Steve Sexton, Junjie Wu and David Zilberman
Abstract: The U.S. housing collapse in 2007 is widely blamed for inducing a financial crisis that spread to the real economy and caused a severe and prolonged downturn. This paper investigates the role of rising gas prices and a dramatic gas price shock in triggering the housing market collapse. Specifically, we employ a parsimonious model of housing demand that integrates the Alonso-Muth model of urban form and the Poterba model of housing investment in order to demonstrate that unanticipated increases in gas prices increased the cost of work commutes, lowering the value of homes away from the city center and increasing foreclosure rates as homeowners either could not afford mortgage payments amid elevated gas expenditures or sought to abandon underwater homes. This theory predicts that gas price shocks disproportionately affect suburban homes that face greater exposure due to longer commutes and greater vulnerability due to lower incomes. Empirical evidence from the 2007-08 housing collapse is presented to support this theory.
My reply to James:
On first glance I'm still having a hard time believing that the price increase was [all] _that_ unanticipated. According to my assumptions, around each of the past three Junes a household spent between $114 and $122 more monthly on gasoline relative to the 2004 baseline. In June 2008, this rose to $190 of which $75 could be considered unanticipated. With all of the poor decisions made by borrowers and lenders, and the housing market following a classic bubble pattern, blaming gas prices seems akin to blaming the 12th beer for next morning's hangover.
In addition, while I'm a big fan of theoretical models and simulations, I would also like to statistical evidence to be convinced that the impact of gas prices was a major factor in this context. In other words, and at the risk of angering the gods at Berkeley (and Corvallis), I would have titled the paper "How high gas prices might have contributed to triggered the financial crisis" (additions, subtractions).
All that said, I'll lighten up on Santorum, except to say that "triggered the housing crisis" is less fundamental than "caused the housing crisis." The bubble burst in housing because ... bubbles tend to burst.