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House Price Moments in Boom-Bust Cycles

In: Housing and the Financial Crisis

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  • Todd Sinai

Abstract

This paper describes six stylized patterns among housing markets in the United States that potential explanations of the housing boom and bust should seek to explain. First, individual housing markets in the U.S. experienced considerable heterogeneity in the amplitudes of their cycles. Second, the areas with the biggest boom-bust cycles in the 2000s also had the largest boom-busts in the 1980s and 1990s, with a few telling exceptions. Third, the timing of the cycles differed across housing markets. Fourth, the largest booms and busts, and their timing, seem to be clustered geographically. Fifth, the cross sectional variance of annual house price changes rises in booms and declines in busts. Finally, these stylized facts are robust to controlling for housing demand fundamentals – namely, rents, incomes, or employment – although changes in fundamentals are correlated with changes in prices.

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This chapter was published in:

  • Edward L. Glaeser & Todd Sinai, 2013. "Housing and the Financial Crisis," NBER Books, National Bureau of Economic Research, Inc, number glae11-1, May.
    This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12619.

    Handle: RePEc:nbr:nberch:12619

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    1. Gadi Barlevy & Jonas D. M. Fisher, 2010. "Mortgage choices and housing speculation," Working Paper Series WP-2010-12, Federal Reserve Bank of Chicago.
    2. Edward L. Glaeser & Joshua D. Gottlieb & Joseph Gyourko, 2010. "Can Cheap Credit Explain the Housing Boom?," NBER Working Papers 16230, National Bureau of Economic Research, Inc.
    3. Atif Mian & Amir Sufi, 2009. "The Consequences of Mortgage Credit Expansion: Evidence from the U.S. Mortgage Default Crisis," The Quarterly Journal of Economics, MIT Press, vol. 124(4), pages 1449-1496, November.
    4. Sergio Rebelo & Martin Eichenbaum & Craig Burnside, 2012. "Understanding Booms and Busts in Housing Markets," 2012 Meeting Papers 114, Society for Economic Dynamics.
    5. Charles Himmelberg & Christopher Mayer & Todd Sinai, 2005. "Assessing High House Prices: Bubbles, Fundamentals and Misperceptions," Journal of Economic Perspectives, American Economic Association, vol. 19(4), pages 67-92, Fall.
    6. Edward L. Glaeser & Joseph Gyourko & Albert Saiz, 2008. "Housing Supply and Housing Bubbles," NBER Working Papers 14193, National Bureau of Economic Research, Inc.
    7. Giglio, Stefano & Pathak, Parag & Campbell, John Y., 2011. "Forced Sales and House Prices," Scholarly Articles 9887623, Harvard University Department of Economics.
    8. William C. Wheaton & Gleb Nechayev, 2008. "The 1998 ?2005 Housing "Bubble" and the Current "Correction": What’s Different This Time?," Journal of Real Estate Research, American Real Estate Society, vol. 30(1), pages 1-26.
    9. Meese Richard & Wallace Nancy, 1994. "Testing the Present Value Relation for Housing Prices: Should I Leave My House in San Francisco?," Journal of Urban Economics, Elsevier, vol. 35(3), pages 245-266, May.
    10. Patrick Bayer & Christopher Geissler & James W. Roberts, 2011. "Speculators and Middlemen: The Role of Intermediaries in the Housing Market," NBER Working Papers 16784, National Bureau of Economic Research, Inc.
    11. Andrew Haughwout & Richard W. Peach & John Sporn & Joseph Tracy, 2012. "The Supply Side of the Housing Boom and Bust of the 2000s," NBER Chapters, in: Housing and the Financial Crisis, pages 69-104 National Bureau of Economic Research, Inc.
    12. Joseph Gyourko & Eduardo Morales & Charles Nathanson & Edward Glaeser, 2011. "Housing Dynamics," 2011 Meeting Papers 307, Society for Economic Dynamics.
    13. Markus K. Brunnermeier & Christian Julliard, 2008. "Money Illusion and Housing Frenzies," Review of Financial Studies, Society for Financial Studies, vol. 21(1), pages 135-180, January.
    14. Francois Ortalo-Magne & Andrea Prat, 2010. "Spatial Asset Pricing: A First Step," STICERD - Theoretical Economics Paper Series /2010/546, Suntory and Toyota International Centres for Economics and Related Disciplines, LSE.
    15. Patrick J. Bayer & Christopher Geissler & James W. Roberts, 2011. "Speculators and Middlemen: The Role of Flippers in the Housing Market," Working Papers 11-03, Duke University, Department of Economics.
    16. Rose N. Lai & Robert A. Van Order, 2010. "Momentum and House Price Growth in the United States: Anatomy of a Bubble," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 38(4), pages 753-773, Winter.
    17. Campbell, Sean D. & Davis, Morris A. & Gallin, Joshua & Martin, Robert F., 2009. "What moves housing markets: A variance decomposition of the rent-price ratio," Journal of Urban Economics, Elsevier, vol. 66(2), pages 90-102, September.
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    Cited by:
    1. Joshua Aizenman & Yothin Jinjarak, 2013. "Real Estate Valuation, Current Account and Credit Growth Patterns, Before and After the 2008-9 Crisis," NBER Working Papers 19190, National Bureau of Economic Research, Inc.
    2. Pan, Huiran & Wang, Chun, 2013. "House prices, bank instability, and economic growth: Evidence from the threshold model," Journal of Banking & Finance, Elsevier, vol. 37(5), pages 1720-1732.
    3. Narayan Bulusu & Jefferson Duarte & Carles Vergara-Alert, 2013. "Booms and Busts in House Prices Explained by Constraints in Housing Supply," Working Papers 13-18, Bank of Canada.
    4. Dettling, Lisa J. & Kearney, Melissa S., 2014. "House prices and birth rates: The impact of the real estate market on the decision to have a baby," Journal of Public Economics, Elsevier, vol. 110(C), pages 82-100.

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