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The Park Place Economist

Abstract

It is generally understood that the 2007- 2009 recession in the United States had its roots in the real estate market. To quote Schiller (2008): “a speculative bubble in the housing market (...) has now caused ruptures among many other countries in the form of financial failures and a global credit crunch” (p. 1). There is a growing body of literature on the economic impact of the bursting of this “speculative bubble”. Efforts have been directed at examining how financial institutions have been impacted and at considering different efforts to re-regulate this industry. As the economic recovery from this particular recession has been slower than after previous contractions, particularly in terms of job creation, research efforts have also focused on labor markets. In this paper, we examine the interplay between financial and labor market factors and the real estate market at the local level. We study McLean County, Illinois, since this county, while being the largest in the state in terms of square mileage, has a median income level and a home ownership rate comparable to those of Cook County –where the City of Chicago is located.

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