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Are Housing Bubbles Contagious? A Case Study of Las Vegas and Los Angeles Home Prices

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  • Mary Riddel

Abstract

This paper asks whether speculative house-price pressure in an economic center can spill into related housing markets. In other words, are bubbles contagious? I develop a theoretical model that allows for speculative price appreciation to spread from one market to another. I estimate an error-correction model using quarterly housing data for Las Vegas and Los Angeles and fundamental market variables from 1978 Quarter 2 through 2008 Quarter 1. Las Vegas prices show significant persistence and adjust slowly to disequilibrium. Contagious price and income growth from the Los Angeles market sustained by naïve expectations contributed to the bubble that formed in Las Vegas

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File URL: http://le.uwpress.org/cgi/reprint/87/1/126
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Bibliographic Info

Article provided by University of Wisconsin Press in its journal Land Economics.

Volume (Year): 87 (2011)
Issue (Month): 1 ()
Pages: 126-144

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Handle: RePEc:uwp:landec:v:87:y:2011:i:1:p:126-144

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Web page: http://le.uwpress.org/

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Cited by:
  1. Ge, Jiaqi, 2013. "Endogenous Rise and Collapse of Housing Prices," Staff General Research Papers, Iowa State University, Department of Economics 36279, Iowa State University, Department of Economics.
  2. Jiaqi Ge, 2013. "Endogenous Formation and Collapse Of Housing Bubbles," Staff General Research Papers, Iowa State University, Department of Economics 36277, Iowa State University, Department of Economics.

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