Real interest policy and the housing cycle (original) (raw)

Cyclicity Of Housing Markets Under The Specific Condition Of The Existence Of A Bubble In The Real Estate Market

Real Estate Management and Valuation, 2015

In recent years, real estate bubbles have been commonplace in housing markets all over the world. That’s why we examine the relation between housing prices during bubbles in 101 cities located in ten different countries, aiming to explain the housing market cycle during a housing bubble, using economic and housing indicators. We obtained data on eight variables used in market cycle analysis which may be able to explain the existence of speculation and the ideal market cycle. The obtained resultsshow that many of economic and housing indicators begin to decrease while housing prices peak. Only the quantity of transactions peaks during the following year. We also observed that a housing bubble can follow three different scenarios, i.e.: the bubble does not burst, or can burst with a slow decline or sudden and rapid collapse. Finally, it is possible to determine that the same variables can provide clear insight into a bubble in the real estate cycle.

Preference for Housing Services and Rational House Price Bubbles

World Academy of Science, Engineering and Technology, International Journal of Economics and Management Engineering, 2016

The recent financial crisis was triggered by the collapse of a housing bubble. This has raised interest among policy makers and researchers in understanding which economic environments are more prone to produce such bubbles. The literature focuses mainly on credit market conditions and their effect on housing bubbles. This paper instead explores the importance of the preference for housing services. In a companion paper, I provide a comprehensive empirical characterization of housing cycles using a large database covering 18 OECD countries over the period 1970:1-2013:4. Three novel stylized facts are identified across countries: the preference for housing services is highly negatively correlated with (1) homeownership rates, and (2) the frequency and (3) the intensity of independent housing booms and boom-bust cycles. This paper provides an explanation for the stylized facts discovered in the data. An overlapping generations model is used as a laboratory for the analysis of the impa...