Testing for a Housing Bubble at the National and Regional Level: The Case of Israel

Itamar Caspi

No 2015.05, Bank of Israel Working Papers from Bank of Israel

Abstract: Between 2008 and 2013, home prices in Israel appreciated by roughly 50 percent in real terms, with increases of nearly 60 percent in some regions. This paper examines whether this phenomenon re_ects the presence of a national or regional housing bubble by applying econometric tests for explosive behavior to qualityadjusted national and regional level data on the home price to rent ratio, while controlling for various fundamental factors, including interest rates, income and the leverage ratio. Overall, study results indicate that the recent housing price appreciations at the national and regional levels are consistent with the developments of the fundamentals – supply and demand factors that are represented by rent payments and interest rates – and not with a housing bubble scenario. Most of the results are robust to a variety of tests and alternate speci_cations. The framework I provide to study the Israeli case may be applied to study other housing markets facing similar developments.

Keywords: Explosiveness tests; housing bubble; dynamic Gordon growth model; regionaldata; Israel (search for similar items in EconPapers)
JEL-codes: C22 G12 R21 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2015-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://boiwebrepec.azurefd.net/RePEc/boi/wpaper/WP_2015.05.pdf First version, 2015 (application/pdf)

Related works:
Working Paper: Testing for a housing bubble at the national and regional level: the case of Israel (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boi:wpaper:2015.05

Access Statistics for this paper

More papers in Bank of Israel Working Papers from Bank of Israel Contact information at EDIRC.
Bibliographic data for series maintained by Yossi Yakhin ().