IDEAS home Printed from https://ideas.repec.org/p/wop/pennzl/401.html
   My bibliography  Save this paper

The Role of Speculation in Real Estate Cycles

Author

Listed:
  • Stephen Malpezzi
  • Susan M. Wachter

Abstract

Our study investigates the role of speculation in real estate cycles. We find that even a simple model of lagged supply response to price changes and speculation is sufficient to generate real estate cycles. Second, the volatility of prices - the biggest purported downside of "speculation" - is strongly related to supply conditions. Even more interestingly, the effect of speculation itself depends on supply conditions. Markets with more responsive regulatory environments, or less natural constraint (from physical geography), will experience less volatility as well as less behavior characterized as speculation. Demand conditions in general, and speculation in particular, can contribute to a boom and bust cycle in housing and real estate markets - but the effects of speculation appear to be dominated by the effect of the price elasticity of supply. In fact, the largest effects of speculation are only observed when supply is inelastic. Thus effective policies will focus on improving the efficiency of the supply of developable land, and real estate generally, including the development of an appropriate regulatory framework for real estate.

Suggested Citation

  • Stephen Malpezzi & Susan M. Wachter, "undated". "The Role of Speculation in Real Estate Cycles," Zell/Lurie Center Working Papers 401, Wharton School Samuel Zell and Robert Lurie Real Estate Center, University of Pennsylvania.
    • Handle: RePEc:wop:pennzl:401
    as

    Download full text from publisher

    File URL: http://realestate.wharton.upenn.edu/papers/full/401.pdf
    Download Restriction: Access to the full text of the articles in this series is restricted
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Maier, Gunther & Herath, Shanaka, 2009. "Real Estate Market Efficiency. A Survey of Literature," SRE-Discussion Papers 2009/07, WU Vienna University of Economics and Business.
    2. 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.
    3. García Serrano, Carlos, 2012. "Del pasmo al marasmo: El sector de la construcción y su relación con la crisis del empleo/The Construction Sector and its Relationship With the Employment Crisis," Estudios de Economia Aplicada, Estudios de Economia Aplicada, vol. 30, pages 183-182, Abril.
    4. Li-Min Hsueh & Hsi-Peng Tseng & Chang-Chiang Hsieh, 2007. "Relationship Between the Housing Vacancy Rate, Housing Price, and the Moving Rate at the Township Level in Taiwan, in 1990 and 2000," International Real Estate Review, Global Social Science Institute, vol. 10(1), pages 119-150.
    5. Ebrahim, M. Shahid & Mathur, Ike, 2007. "Pricing home mortgages and bank collateral: A rational expectations approach," Journal of Economic Dynamics and Control, Elsevier, vol. 31(4), pages 1217-1244, April.
    6. Quigley, John M. & Raphael, Steven & Rosenthal, Larry A., 2008. "Measuring Land-Use Regulations and Their Effects in the Housing Market," Berkeley Program on Housing and Urban Policy, Working Paper Series qt07t5d0q4, Berkeley Program on Housing and Urban Policy.
    7. Franz Fuerst & Anna-Maija Grandy, "undated". ""Oft Expectation Fails": A Time-Series Analysis of Construction Starts in the London Office Market," Real Estate & Planning Working Papers rep-wp2010-13, Henley Business School, University of Reading.
    8. Che, Yeon-Koo & Gale, Ian, 2006. "Market versus Non-Market Assignment of Initial Ownership," MPRA Paper 6095, University Library of Munich, Germany, revised 30 May 2006.
    9. Qin Xiao & Gee Kwang Randolph Tan, 2007. "Signal Extraction with Kalman Filter: A Study of the Hong Kong Property Price Bubbles," Urban Studies, Urban Studies Journal Limited, vol. 44(4), pages 865-888, April.
    10. Mynbaev, Kairat & Ibrayeva, Saniya, 2011. "Housing market of Almaty," MPRA Paper 36683, University Library of Munich, Germany.
    11. Ebrahim, M. Shahid, 2009. "Can an Islamic model of housing finance cooperative elevate the economic status of the underprivileged?," Journal of Economic Behavior & Organization, Elsevier, vol. 72(3), pages 864-883, December.
    12. Richard K. Green & Susan M. Wachter, 2007. "The housing finance revolution," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 21-67.
    13. Wei Li, 2008. "Property tax and speculative bubble: An empirical analysis of Tianjin," Psychometrika, Springer;The Psychometric Society, vol. 3(4), pages 627-643, December.
    14. Qin Xiao & Donghyun Park, 2010. "Seoul housing prices and the role of speculation," Empirical Economics, Springer, vol. 38(3), pages 619-644, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wop:pennzl:401. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Thomas Krichel (email available below). General contact details of provider: https://edirc.repec.org/data/szupaus.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.