Housing Bubbles with Phase Transitions

Tomohiro Hirano and Alexis Akira Toda

Papers from arXiv.org

Abstract: We analyze how equilibrium housing prices are determined in the process of economic development within an overlapping generations model with perfect housing and rental markets. We characterize the rent growth rate in all equilibria. The economy exhibits a two-stage phase transition: as incomes of home buyers rise, the equilibrium regime changes from fundamental to bubble possibility, where fundamental and bubbly equilibria coexist. With even higher incomes, fundamental equilibria disappear and housing bubbles become a necessity. We also discuss extensions and refinements such as equilibrium uniqueness, multiple savings vehicles, welfare implications, credit- and expectation-driven bubbles, and testable implications of our theory.

Date: 2023-03, Revised 2025-05
New Economics Papers: this item is included in nep-des, nep-dge, nep-mac and nep-ure
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Citations: View citations in EconPapers (3)

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Related works:
Working Paper: Housing Bubbles with Phase Transitions (2024)
Working Paper: Housing Bubbles with Phase Transitions (2024)
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