A Rational Explanation for Boom-and-Bust Price Patterns in Real Estate Markets

Su Han Chan (), Ko Wang () and Jing Yang ()
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Su Han Chan: Department of Real Estate at the Zicklin School of Business, Baruch College/CUNY
Ko Wang: Newman Chair in Real Estate Finance, Department of Real Estate at the Zicklin School of Business, Baruch College/CUNY
Jing Yang: Department of Finance at the Mihaylo College of Business and Economics, California State University- Fullerton

International Real Estate Review, 2011, vol. 14, issue 3, 257-282

Abstract: This paper develops a stylized model to provide a rational explanation for the boom-and-bust price movement pattern that we frequently observe in the real world. Our stylized model indicates that there are three conditions to form a boom-and- bust price pattern in a community: a move-in of high income residents, wide income gap between new and existing residents, and supply process that leads to an inventory buildup. It seems that, based on these three conditions, China is more likely to experience a boom-and-bust price movement pattern than a developed country with a more mature and less vibrant economy.

Keywords: Real Estate Cycles; Boom-and-Bust; Supply Decision; Moving Costs (search for similar items in EconPapers)
JEL-codes: L85 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (1)

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