An Early Warning System to Predict the House Price Bubbles

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn this paper, we construct the country-specific chronologies of the house price bubbles for 12 OECD countries over the period 1969:Q1-2010:Q2. These chronologies are obtained using a combination of a fundamental and a filter approaches. The resulting speculative bubble chronology is the one that provides the highest concordance between these two techniques. In addition, we suggest an early warning system based on three alternative approaches: signalling approach, logit and probit models. It is shown that the latter two models allow much more accurate predictions of the house price bubbles than the signalling approach. The prediction accuracy of the logit and probit models is high enough to make them useful in forecasting the future speculative bubbles in housing market. Thus, our method can be used by the policymakers in their attempts to timely detect the house price bubbles and attenuate their devastating effects on the domestic and world economy.

Fundamental Determinants of Real Estate Prices: A Panel Study of German Regions

“…Therefore, such an analysis is highly relevant from a policy perspective. One such option might be to use regional data for developing a system of regional indicators (Dreger and Kholodilin 2011). Using regional data for developing a system of regional indicators of real estate market developments and aggregating these in order to come up with an overall indicator could be used for guiding and evaluating policy decisions.…”

Constructing an index to examine house price misalignment with fundamentals in Malta

“…The Deutsche Bundesbank (2013) estimates fundamental residential property prices for Germany using panel regression analysis. Dreger and Kholodilin (2013) propose an early warning system to identify speculative bubbles in house prices using different approaches, including logit and probit models. Gerdesmeier et al (2012) applies a quantile regression model to detect booms and busts in the housing market, pointing to possible non-linear effects.…”

In‐Sample and Out‐of‐Sample Prediction of stock Market Bubbles: Cross‐Sectional Evidence

“…By and large these contributions are concerned with the conditional analysis of bubbles on stock markets (e.g. Christiano et al, 2008), house markets (Agnello and Schuknecht, 2011;Dreger and Kholodilin, 2011;Rousová and van den Noord, 2011) or both (e.g. Borio and Lowe, 2002;Helbling and Terrones, 2003) or composite assets constructed from these two markets (e.g.…”