Testing for rational bubbles in the housing market

Bjørnar Karlsen Kivedal

Working Paper Series from Department of Economics, Norwegian University of Science and Technology

Abstract: This paper investigates the presence of a bubble in the US housing market prior to the 2007 subprime mortgage financial crisis. The relationship between housing prices and rental prices, known as the price-rent ratio, is an important measure of a potential deviation between housing prices and its fundamental value. Additionally, the interest rate is taken into account since it is an important factor in determining demand for housing mortgages and thereby influence housing prices. These relationships are then put into a theoretical model framework. The empirical evidence suggests that there was a bubble in the housing market prior to the financial crisis, even when controlling for the decreasing interest rate in the period. Hence, the econometric procedures used in the analysis may be relevant for monitoring the housing market.

Pages: 18 pages
Date: 2012-08-17
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.svt.ntnu.no/iso/WP/2012/10_housingbubbles_BKK.pdf (application/pdf)

Related works:
Journal Article: Testing for rational bubbles in the US housing market (2013)
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:nst:samfok:13312

Access Statistics for this paper

More papers in Working Paper Series from Department of Economics, Norwegian University of Science and Technology Contact information at EDIRC.
Bibliographic data for series maintained by Anne Larsen ().