Bubble, Bubble, Where's the Housing Bubble?
Margaret Hwang Smith and
Additional contact information
Margaret Hwang Smith: Pomona College
Gary Smith: Pomona College
Brookings Papers on Economic Activity, 2006, vol. 37, issue 1, 1-68
Discussions of whether a housing bubble exists generally rely on indirect barometers such as rapidly increasing prices, unrealistic expectations of future price increases, and rising ratios of housing price indexes to indexes of household income. Such measures cannot, however, answer the key question of whether housing prices are justified by the value of the services that a home provides. We show how to estimate the fundamental value of a home from rent data. We then apply this procedure in ten metropolitan areas, using a unique set of rent and sale price data for matched single-family homes. We do not find evidence of a bubble in most of these cities: under a variety of plausible assumptions, buying a home in these cities today still appears to be an attractive long-term investment.
Keywords: housing bubble; macroeconomics; bubble; house (search for similar items in EconPapers)
JEL-codes: G12 E39 R21 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations View citations in EconPapers (22) Track citations by RSS feed
Downloads: (external link)
http://www.brookings.edu/~/media/Files/Programs/ES ... 2006a_bpea_smith.pdf (application/pdf)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:bin:bpeajo:v:37:y:2006:i:2006-1:p:1-68
Access Statistics for this article
More articles in Brookings Papers on Economic Activity from Economic Studies Program, The Brookings Institution Contact information at EDIRC.
Series data maintained by Jennifer Ambrosino ().