A mechanism for booms and busts in housing prices

Hillebrand, Marten; Kikuchi, Tomoo

doi:10.1016/j.jedc.2014.09.033

Cited by 14 publications

(16 citation statements)

References 13 publications

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“…A growing number of studies on housing bubbles use personal income as the proxy for economic fundamentals in discussing whether housing prices can be explained by economic fundamentals (e.g. Abelson, Joyeux, Milunovich, & Chung, ; Abraham & Hendershott, ; Case & Shiller, ; Gallin, ; Glaeser, Gyourko, Morales, & Nathanson, ; Hillebrand & Kikuchi, ; Li, ; McCarthy & Peach, ; Meen, ; Otto, ; Pan & Wang, ; Sommer, Sullivan, & Verbrugge, ) . For instance, Case and Shiller () use three measures to represent state‐level fundamentals in their analysis of US housing markets: personal per‐capita income, population, and employment.…”

Section: Literature Reviewmentioning

confidence: 99%

“…Moreover, the theoretical literature on housing markets uses income as the proxy for economic fundamentals and investigates how income shocks influence housing market dynamics (e.g. Glaeser et al, ; Hillebrand & Kikuchi, ; Sommer et al, ). For instance, Hillebrand and Kikuchi () find that small and persistent income shocks lead to substantial housing‐price boom–bust cycles, extending the pure‐exchange overlapping‐ generations framework with a durable housing commodity.…”

Section: Literature Reviewmentioning

confidence: 99%

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Vulnerabilities to housing bubbles: Evidence from linkages between housing prices and income fundamentals

Huang

2017

International Finance

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This paper investigates US state-level housing markets by examining three signs of vulnerabilities to housing bubbles: negative or insignificant co-movements between housing prices and income fundamentals, high housing-price persistence, and boom-bust regime-switching phenomena. The study effectively mitigates potential estimation bias by estimating income growth using three explanatory variables for housing markets: the stock price, the federal funds rate, and non-farm-employment growth. The moving-average thresholds track housing boom-bust regime shifts from a forward-looking perspective. Although only California displays high housing-bubble vulnerability in all dimensions analysed, all selected states show signs of housing-bubble vulnerabilities because income fundamentals lack explanatory power for housing price dynamics. The results suggest that the US government had difficulties in stabilizing the housing market during the period 1976-2010.

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Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Vulnerabilities to housing bubbles: Evidence from linkages between housing prices and income fundamentals

Huang

2017

International Finance

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“…This statement showed that they are areas overlooked and not addressed properly particularly on methods to measure the quality level of housing. Previous research conducted by other researchers such as Khoiry, Tawil, Hamzah, Ani, & Sood, (2012), Hillebrand & Kikuchi, (2015), and Hartley, (2014) showed degree of efforts to identify factors of characteristic house qualities, but their research produced little empirical and theoretical basis in identifying quality level off for each specific characteristics for houses. These studies conducted analysed the factors primarily, and have a minimal amount of measuring and ranking the weightings of the characteristics qualities.…”

Section: Measurement For Characteristics Of Housingmentioning

confidence: 99%

“…Amongst their focus groups are house owners, property valuers and also estate agents. All the while, opinions, and views expressed by panel experts and focus groups are credible data, but validation must be conducted by other approaches such as the quantitative approach (Hillebrand & Kikuchi, 2015).…”

Section: Measurement For Characteristics Of Housingmentioning

confidence: 99%

Characteristic Qualities Impacting Landed House Prices: Better homes, better livelihood

Masri¹,

Nawawi²,

Safian³

et al. 2017

E-BPJ

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The research was conducted to find the characteristics quality of houses in Malaysia. The aim of this research was to produce the ranking characteristics of house qualities, and determining its weightages. The methodology used in this research was primarily by using the Delphi Method to ascertain characteristics quality and also Analytical Hierarchy Process to determine the ranking of the characteristics quality. Data collection gathered through a structured questionnaire that incorporates the element of Saaty's Scale using variables outlined from review and interview. A theoretical framework of the research was established from this that will lead to future research model.

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“…A common theme in this literature is that rational bubbles emerge to reduce some inefficiency in the financial market, such as an aggregate shortage of assets for storage or a credit market imperfection, as in Miao andWang (2011), Martin andVentura (2012), and Hirano and Yanagawa (2017), Ikeda and Phan (2018). By departing from the pure bubble assumption and modeling a bubble as attached to a fundamentally useful durable asset such as housing, our paper is related to Arce andLópez-Salido (2011), Miao and, Wang and Wen (2012), Hillebrand and Kikuchi (2015), Zhao (2015), Kikuchi and Thepmongkol (2015), and Basco (2016).…”

Section: Introductionmentioning

confidence: 99%

Regressive Welfare Effects of Housing Bubbles

Graczyk¹,

Phan²

2018

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We analyze the welfare effects of asset bubbles in a model with income inequality and financial friction. We show that a bubble that emerges in the value of housing, a durable asset that is fundamentally useful for everyone, has regressive welfare effects.By raising the housing price, the bubble benefits high-income savers but negatively affects low-income borrowers. The key intuition is that, by creating a bubble in the market price, savers' demand for the housing asset for investment purposes imposes a negative externality on borrowers, who only demand the housing asset for utility purposes. The model also implies a feedback loop: high income inequality depresses the interest rates, facilitating the existence of housing bubbles, which in turn have regressive welfare effects.

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A mechanism for booms and busts in housing prices

Cited by 14 publications

References 13 publications

Vulnerabilities to housing bubbles: Evidence from linkages between housing prices and income fundamentals

Vulnerabilities to housing bubbles: Evidence from linkages between housing prices and income fundamentals

Characteristic Qualities Impacting Landed House Prices: Better homes, better livelihood

Regressive Welfare Effects of Housing Bubbles

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