A simple model of a speculative housing market

Roberto Dieci and Frank Westerhoff

No 62, BERG Working Paper Series from Bamberg University, Bamberg Economic Research Group

Abstract: We develop a simple model of a speculative housing market in which the demand for houses is influenced by expectations about future housing prices. Guided by empirical evidence, agents rely on extrapolative and regressive forecasting rules to form their expectations. The relative importance of these competing views evolves over time, subject to market circumstances. As it turns out, the dynamics of our model is driven by a two-dimensional nonlinear map which may display irregular boom and bust housing price cycles, as repeatedly observed in many actual markets. However, we also find that speculation may be a source of both stability and instability.

Keywords: Housing markets; Speculation; Boom and bust cycles; Nonlinear Dynamics (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (17)

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Journal Article: A simple model of a speculative housing market (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bamber:62

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