A1 Refereed original research article in a scientific journal
Measuring house price bubbles
Authors: Steven C. Bourassa, Martin Hoesli, Elias Oikarinen
Publisher: Wiley
Publication year: 2019
Journal: Real Estate Economics
Volume: 47
Issue: 2
First page : 534
Last page: 563
Number of pages: 30
ISSN: 1080-8620
eISSN: 1540-6229
DOI: https://doi.org/10.1111/1540-6229.12154
Abstract
Using data for six metropolitan housing markets in three countries, this article provides a comparison of methods used to measure house price bubbles. We use an asset pricing approach to identify bubble periods retrospectively andthen compare those results with results produced by six other methods. We also apply the various methods recursively to assess their ability to identify bubbles as they form. In view of the complexity of the asset pricing approach,we conclude that a simple price–rent ratio measure is a reliable method both ex post and in real time. Our results have important policy implications because a reliable signal that a bubble is forming could be used to avoid further houseprice increases.
Using data for six metropolitan housing markets in three countries, this article provides a comparison of methods used to measure house price bubbles. We use an asset pricing approach to identify bubble periods retrospectively andthen compare those results with results produced by six other methods. We also apply the various methods recursively to assess their ability to identify bubbles as they form. In view of the complexity of the asset pricing approach,we conclude that a simple price–rent ratio measure is a reliable method both ex post and in real time. Our results have important policy implications because a reliable signal that a bubble is forming could be used to avoid further houseprice increases.
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