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The interaction of actual and fundamental house prices: A general model with an application to Sweden

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  • Bergman, U. Michael
  • Sørensen, Peter Birch

Abstract

The paper presents a general method for estimating a country’s level of fundamental house prices and its interaction with actual house prices. We set up a unified empirical model which can be used to analyze the time-series behavior of the fundamental house price and to test various hypotheses regarding its relation to the actual house price. Conditional forecasts from the model allow us to simulate policy experiments. To illustrate how the methods work, we apply it to data for Sweden. We find a tendency for actual house prices to converge on fundamental prices, albeit rather slowly. To achieve a significant fall in actual house prices it is necessary to increase the user cost substantially.

Suggested Citation

  • Bergman, U. Michael & Sørensen, Peter Birch, 2021. "The interaction of actual and fundamental house prices: A general model with an application to Sweden," Journal of Housing Economics, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:jhouse:v:54:y:2021:i:c:s1051137721000425
    DOI: 10.1016/j.jhe.2021.101792
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    1. Randhi Atiqi & Muhammad Dimyati & Ahmad Gamal & Rizki Pramayuda, 2022. "Appraisal of Building Price in Urban Area Using Light Detection and Ranging (LiDAR) Data in Depok City," Land, MDPI, vol. 11(8), pages 1-15, August.

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    More about this item

    Keywords

    Fundamental house prices; house price dynamics; Housing bubbles;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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