Advanced Search
MyIDEAS: Login to save this paper or follow this series

Bubbles, Post-Crash Dynamics, and the Housing Market

Contents:

Author Info

  • Crocker H. Liu

    (Cornell University, School of Hotel Administration)

  • Adam Nowak

    (West Virginia University, College of Business and Economics)

  • Stuart Rosenthal

    (Syracuse University, Department of Economics and Center for Policy Research)

Registered author(s):

    Abstract

    This paper documents and explains previously unrecognized post-crash dynamics following the collapse of a housing bubble. A simple model predicts that speculative developers ensure stable pre-crash relative prices between small and large homes while their post-crash exit allows small-home relative values to fall. Evidence from Phoenix supports the model. Although home prices doubled 2004-2006, relative prices of small-to-large homes remained nearly constant but then plummeted post-crash. As speculative developers return relative prices must return to pre-boom levels, consistent with patterns since 2011. Anticipated mean reversion indicates that cities can reduce post-crash volatility and mispricing by publicizing size-stratified house price indexes.

    Download Info

    If you experience problems downloading a file, check if you have the proper application to view it first. 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.
    File URL: http://www.be.wvu.edu/phd_economics/pdf/14-18.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Department of Economics, West Virginia University in its series Working Papers with number 14-18.

    as in new window
    Length: 50 pages
    Date of creation: May 2014
    Date of revision:
    Handle: RePEc:wvu:wpaper:14-18

    Contact details of provider:
    Postal: P.O. Box 6025, Morgantown, WV 26506-6025
    Phone: (304) 293-7859
    Fax: (304) 293-2233
    Email:
    Web page: http://www.be.wvu.edu/phd_economics/
    More information through EDIRC

    Related research

    Keywords: Housing Bubble; Repeat Sales; Post-Crash Dynamics;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    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.:
    as in new window
    1. Horowitz, Joel L, 1992. "The Role of the List Price in Housing Markets: Theory and an Econometric Model," Journal of Applied Econometrics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 7(2), pages 115-29, April-Jun.
    2. Harding, John P. & Rosenthal, Stuart S. & Sirmans, C.F., 2007. "Depreciation of housing capital, maintenance, and house price inflation: Estimates from a repeat sales model," Journal of Urban Economics, Elsevier, vol. 61(2), pages 193-217, March.
    3. 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.
    4. Yongmin Chen & Robert W. Rosenthal, 1993. "Asking Prices as Commitment Devices," Papers, Boston University - Industry Studies Programme 0042, Boston University - Industry Studies Programme.
    5. Engelhardt, Gary V., 2003. "Nominal loss aversion, housing equity constraints, and household mobility: evidence from the United States," Journal of Urban Economics, Elsevier, vol. 53(1), pages 171-195, January.
    6. Glaeser, Edward & Saiz, Albert & Gyourko, Joseph, 2008. "Housing Supply and Housing Bubbles," Scholarly Articles 2962640, Harvard University Department of Economics.
    7. Zuehlke, Thomas W, 1987. "Duration Dependence in the Housing Market," The Review of Economics and Statistics, MIT Press, vol. 69(4), pages 701-04, November.
    8. Andrew Haughwout & Richard W. Peach & John Sporn & Joseph Tracy, 2012. "The supply side of the housing boom and bust of the 2000s," Staff Reports, Federal Reserve Bank of New York 556, Federal Reserve Bank of New York.
    9. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    10. Donald R. Haurin & Jessica L. Haurin & Taylor Nadauld & Anthony Sanders, 2010. "List Prices, Sale Prices and Marketing Time: An Application to U.S. Housing Markets," Real Estate Economics, American Real Estate and Urban Economics Association, American Real Estate and Urban Economics Association, vol. 38(4), pages 659-685, Winter.
    11. Guerrieri, Veronica & Hartley, Daniel & Hurst, Erik, 2013. "Endogenous gentrification and housing price dynamics," Journal of Public Economics, Elsevier, Elsevier, vol. 100(C), pages 45-60.
    12. Antonio M. Merlo & François Ortalo-Magné, 2002. "Bargaining over Residential Real Estate: Evidence from England," CESifo Working Paper Series 778, CESifo Group Munich.
    13. Haurin, Donald & McGreal, Stanley & Adair, Alastair & Brown, Louise & Webb, James R., 2013. "List price and sales prices of residential properties during booms and busts," Journal of Housing Economics, Elsevier, Elsevier, vol. 22(1), pages 1-10.
    14. Flood, Robert P & Hodrick, Robert J, 1990. "On Testing for Speculative Bubbles," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 4(2), pages 85-101, Spring.
    15. Abdullah Yavas & Shiawee Yang, 1995. "The Strategic Role of Listing Price in Marketing Real Estate: Theory and Evidence," Real Estate Economics, American Real Estate and Urban Economics Association, American Real Estate and Urban Economics Association, vol. 23(3), pages 347-368.
    16. Anglin, Paul M & Rutherford, Ronald & Springer, Thomas M, 2003. "The Trade-Off Between the Selling Price of Residential Properties and Time-on-the-Market: The Impact of Price Setting," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 26(1), pages 95-111, January.
    17. Gyourko, Joseph & Tracy, Joseph, 2014. "Reconciling theory and empirics on the role of unemployment in mortgage default," Journal of Urban Economics, Elsevier, vol. 80(C), pages 87-96.
    18. Stuart S. Rosenthal, 2014. "Are Private Markets and Filtering a Viable Source of Low-Income Housing? Estimates from a "Repeat Income" Model," American Economic Review, American Economic Association, American Economic Association, vol. 104(2), pages 687-706, February.
    19. Marcus Allen & Ronald Rutherford & Thomas Thomson, 2009. "Residential Asking Rents and Time on the Market," The Journal of Real Estate Finance and Economics, Springer, Springer, vol. 38(4), pages 351-365, May.
    20. Sass, Tim R, 1988. "A Note on Optimal Price Cutting Behavior under Demand Uncertainty," The Review of Economics and Statistics, MIT Press, vol. 70(2), pages 336-39, May.
    21. John P. Harding & Stuart S. Rosenthal & C. F. Sirmans, 2003. "Estimating Bargaining Power in the Market for Existing Homes," The Review of Economics and Statistics, MIT Press, vol. 85(1), pages 178-188, February.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:wvu:wpaper:14-18. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Josh Hall).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.