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From Boom To BubbleHow Finance Built the New Chicago$
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Rachel Weber

Print publication date: 2015

Print ISBN-13: 9780226294483

Published to Chicago Scholarship Online: May 2016

DOI: 10.7208/chicago/9780226294513.001.0001

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Fast Money Builds the Speculative City

Fast Money Builds the Speculative City

(p.38) 2 Fast Money Builds the Speculative City
From Boom To Bubble

Rachel Weber

University of Chicago Press

This chapter examines the role of financial markets in real estate development and how financial actors influence the form of American cities. It serves as a basic primer in development finance for the uninitiated, introducing the players who make up the contemporary system of real estate finance by following a building's “financial lifecycle,” from construction through the securitization of its debt. It also describes what happens to that lifecycle during a typical boom-bubble-bust sequence. One of the most remarkable trends in recent economic history has been the dramatic increase in global financial capital circulating within the property sector. Markets for the development and acquisition of property have historically provided an outlet for investors fleeing the “primary” productive sector but recent financial innovations, such as Commercial Mortgage Backed Securities, and regulatory liberalization have sped the pace of speculation and capital switching. This chapter identifies key moments in the financialization of real estate that have led to periods of heightened construction activity in U.S. cities, focusing on the specifics of the last two booms (the 1980s and the 2000s).

Keywords:   real estate, financial markets, debt; securitization, speculation, financialization

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