Lax lending standards alone did not bring about the housing bubble, according to a study by the New York Federal Reserve, challenging the widely held view of the origins of the collapse in home prices.

The study released on Thursday argues that swings in labor productivity played a significant role in the rapid growth and subsequent steep drop in house prices.

Consumers thought that because they were working harder starting in the mid-1990s, their paychecks would follow suit, encouraging them to pay high prices for housing, the study found.

The optimism continued until 2007, when evidence of a slowdown in productivity helped quash the rosy view and with it the housing boom.

Understanding the link between productivity -- output per hour of work -- and house prices could help inform policy decisions, said James Kahn, the study's author.

The current housing crisis stemmed in large measure from a change in economic fundamentals and was only exacerbated by credit market conditions, Kahn, a professor of economics at Yeshiva University wrote in the Federal Reserve Bank of New York's Current Issues in Economics and Finance journal.

Indeed, what appear in retrospect to be relatively lax credit conditions in the early part of this decade may have emerged in part because of then-justifiable, although ultimately misplaced, optimism about income growth, he said.

Better understanding of what was behind the current housing crisis could help policymakers gauge the impact that credit market interventions have on the housing market, Kahn said.

The link between productivity and the housing downturn could also offer insight into when house prices will stop falling.

If productivity growth reverts to the higher rates seen between 1996 to 2004 and between 1947 to 1972, the model used by the study suggests that housing prices will bottom out and begin growing again faster than overall inflation.

And even if productivity growth remains slow, the model would imply that housing price declines will ease. But it also suggests that prices could continue to fall modestly on an inflation-adjusted basis, as they did in the 1980s and 1990s, Kahn said.

Kahn was a vice president at the New York Fed at the time the article was written. The full article can be found at

(Reporting by Kristina Cooke; editing by Jeffrey Benkoe)