Even though economic models have been relatively successful in explaining the long run patterns of house prices, they have more difficulties in explaining short run developments of the housing markets. However, the fact that during such ‘bubbles’ the spatial pattern of house prices, which can mainly be attributed to accessibility differences, usually remains unchanged, suggests that the irrational forces that are presumably responsible for unexplained movements in house prices obey some regularities: they seem to affect the level of house prices, but not their spatial pattern. This suggests that it is worthwhile to consider the explanatory power of psychological variables like those reflecting general (nation wide) feelings of optimism or pessimism. This paper considers the development of Dutch house prices in the years 1999 and 2000, when house prices increased fast. Existing explanations of the long run development of Dutch house prices on the basis of economic fundamentals (notably income and the mortgage interest rate) would suggest a much more modest development of house prices over these years. We also show that commonly used housing market indicators, notably the number of vacancies (houses for sale) and the time on the market, are unable to explain the development of house prices during this period. However, we find a strong relationship between the development of house prices and the Dutch index of consumer confidence.
Download Info
To download:
If you experience problems downloading a file, check if you have the
proper application to
view it first. Information about this may be contained
in the File-Format links below. In case of further problems read
the IDEAS help
page. Note that these files are not on the IDEAS
site. Please be patient as the files may be large.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.: