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Further evidence on the existence of housing market bubbles

Author

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  • Steven C. Bourassa
  • Patric H. Hendershott
  • James Murphy

Abstract

Studies of United States, Swedish, and Australian cities have obtained mixed results regarding the existence of housing market bubbles. The US estimates imply large bubbles on its two coasts, but not inland, and the Australian and Swedish estimates imply insignificant and modest bubbles, respectively. The results of the present work for three New Zealand cities are most similar to those for Swedish cities. Like evidence from the other countries, real income (employment and the real wage rate), real construction costs, and the real after-tax interest rate all matter. While the estimation methodology is similar to an error correction model, it is believed to be a superior method when the data time series is short. In any event, tests for house price bubbles would seem to be necessary in house price research.

Suggested Citation

  • Steven C. Bourassa & Patric H. Hendershott & James Murphy, 2001. "Further evidence on the existence of housing market bubbles," Journal of Property Research, Taylor & Francis Journals, vol. 18(1), pages 1-19.
    • Handle: RePEc:taf:jpropr:v:18:y:2001:i:1:p:1-19
    DOI: 10.1080/0959991001004110
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    Cited by:

    1. Carlos Pestana BARROS & Zhongfei CHEN & Luis A. GIL-ALANA, 2013. "Long Memory in the Housing Price Indices in China," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(7), pages 785-807, July.
    2. Gao Lu Zou & Kwong Wing Chau, 2015. "Determinants and Sustainability of House Prices: The Case of Shanghai, China," Sustainability, MDPI, vol. 7(4), pages 1-25, April.
    3. Angela Black & Patricia Fraser & Martin Hoesli, 2006. "House Prices, Fundamentals and Bubbles," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9‐10), pages 1535-1555, November.
    4. Phang, Sock-Yong, 2004. "House prices and aggregate consumption: do they move together? Evidence from Singapore," Journal of Housing Economics, Elsevier, vol. 13(2), pages 101-119, June.
    5. Mehmet Balcilar & Rangan Gupta & Nico Frederick Katzke, 2015. "Identifying Periods of US Housing Market Explosivity," Working Papers 15-03, Eastern Mediterranean University, Department of Economics.
    6. Park, Donghyun & Xiao, Qin, 2009. "Housing Prices and the Role of Speculation: The Case of Seoul," ADB Economics Working Paper Series 146, Asian Development Bank.
    7. Mehmet Balcilar & Rangan Gupta & Charl Jooste & Omid Ranjbar, 2015. "Characterising the South African Business Cycle: Is GDP Difference-Stationary or Trend-Stationary in a Markov-Switching Setup?," Working Papers 201529, University of Pretoria, Department of Economics.
    8. Steven C. BOURASSA & Martin HOESLI & Jian SUN, 2003. "The Price of Aesthetic Externalities," FAME Research Paper Series rp98, International Center for Financial Asset Management and Engineering.
    9. Fan, Ying & Yang, Zan & Yavas, Abdullah, 2019. "Understanding real estate price dynamics: The case of housing prices in five major cities of China✰," Journal of Housing Economics, Elsevier, vol. 43(C), pages 37-55.
    10. Patricia Fraser & Martin Hoesli & Lynn McAlevey, 2008. "House Prices and Bubbles in New Zealand," The Journal of Real Estate Finance and Economics, Springer, vol. 37(1), pages 71-91, July.
    11. Renée A. Fry & Vance L. Martin & Nicholas Voukelatos, 2010. "Overvaluation in Australian Housing and Equity Markets: Wealth Effects or Monetary Policy?," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 465-485, December.
    12. Raymond Tse & James Webb, 2008. "Housing markets in China: an empirical evaluation of present-value model," Journal of Chinese Economic and Business Studies, Taylor & Francis Journals, vol. 6(1), pages 67-75.
    13. John Muellbauer & Gavin Cameron & John Muellbauer, 2006. "Was There A British House Price Bubble? Evidence from a Regional Panel," Economics Series Working Papers 276, University of Oxford, Department of Economics.
    14. Steven C. Bourassa & Donald R. Haurin & Jessica L. Haurin & Martin Hoesli & Jian Sun, 2009. "House Price Changes and Idiosyncratic Risk: The Impact of Property Characteristics," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(2), pages 259-278, June.
    15. Dennis R. Capozza & Patric H. Hendershott & Charlotte Mack & Christopher J. Mayer, 2002. "Determinants of Real House Price Dynamics," NBER Working Papers 9262, National Bureau of Economic Research, Inc.
    16. Qin Xiao & Donghyun Park, 2010. "Seoul housing prices and the role of speculation," Empirical Economics, Springer, vol. 38(3), pages 619-644, June.
    17. Tommaso Gabrieli & Keith Pilbeam & Tianyu Wang, 2018. "Estimation of bubble dynamics in the Chinese real estate market: a State space model," International Economics and Economic Policy, Springer, vol. 15(2), pages 483-499, April.
    18. Roselyne Joyeux & George Milunovich, 2015. "Speculative bubbles, financial crises and convergence in global real estate investment trusts," Applied Economics, Taylor & Francis Journals, vol. 47(27), pages 2878-2898, June.
    19. Bourassa, Steven C. & Hoesli, Martin & Scognamiglio, Donato & Zhang, Sumei, 2011. "Land leverage and house prices," Regional Science and Urban Economics, Elsevier, vol. 41(2), pages 134-144, March.
    20. Xie, Zixiong & Chen, Shyh-Wei & Wu, An-Chi, 2019. "Asymmetric adjustment, non-linearity and housing price bubbles: New international evidence," The North American Journal of Economics and Finance, Elsevier, vol. 50(C).
    21. Christophe Blot, 2006. "Peut-on parler de bulle sur le marché immobilier au Luxembourg ?," BCL working papers 20, Central Bank of Luxembourg.
    22. Francesco Tajani & Pierluigi Morano & Maria Paz Saez-Perez & Felicia Di Liddo & Marco Locurcio, 2019. "Multivariate Dynamic Analysis and Forecasting Models of Future Property Bubbles: Empirical Applications to the Housing Markets of Spanish Metropolitan Cities," Sustainability, MDPI, vol. 11(13), pages 1-21, June.
    23. Ying Fan & Abdullah Yavas, 2023. "Price Dynamics in Public and Private Commercial Real Estate Markets," The Journal of Real Estate Finance and Economics, Springer, vol. 67(1), pages 150-190, July.

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