Detecting imbalances in house prices: What goes up must come down?

Andre Anundsen ()

No 2016/11, Working Paper from Norges Bank

Abstract: With the aid of econometric modeling, I investigate whether rapidly increasing house prices necessarily imply the existence of a bubble that will eventually burst. I consider four alternative econometric methods to construct indicators of housing market imbalances for the US, Finland and Norway. The four approaches are used to study if house prices in these countries in the 2000s can be explained by underlying economic fundamentals, or whether the developments are best characterized by bubble-dynamics. For the US, all measures unanimously suggest a bubble in the early to mid 2000s, whereas current US house prices are found to be aligned with economic fundamentals. Only one of the measures indicate imbalances in the Finnish housing market, while none of the measures suggest a bubble in Norway.

Keywords: Cointegration; Explosive Roots; Housing Bubbles (search for similar items in EconPapers)
JEL-codes: C22 C32 C51 C52 C53 G01 R21 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2016-08-09
New Economics Papers: this item is included in nep-hme and nep-ure
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Citations: View citations in EconPapers (2)

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http://www.norges-bank.no/en/Published/Papers/Working-Papers/2016/112016/

Related works:
Journal Article: Detecting Imbalances in House Prices: What Goes Up Must Come Down? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bno:worpap:2016_11

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