Abstract
Abstract In recent years, real estate bubbles have been commonplace in housing markets all over the world. That’s why we examine the relation between housing prices during bubbles in 101 cities located in ten different countries, aiming to explain the housing market cycle during a housing bubble, using economic and housing indicators. We obtained data on eight variables used in market cycle analysis which may be able to explain the existence of speculation and the ideal market cycle. The obtained resultsshow that many of economic and housing indicators begin to decrease while housing prices peak. Only the quantity of transactions peaks during the following year. We also observed that a housing bubble can follow three different scenarios, i.e.: the bubble does not burst, or can burst with a slow decline or sudden and rapid collapse. Finally, it is possible to determine that the same variables can provide clear insight into a bubble in the real estate cycle.
Highlights
Modern real estate speculation had its beginning in the 1970s and early 1980s in the south-eastern United States and Southern California (MELLO, SPOLADOR 2004)
This paper aims to explain the normal cycle of the housing market during a real estate bubble
The market cycle with real estate speculation is divided into four phases: the initial phase, growth of the bubble, peak of the bubble and the bubble burst
Summary
Modern real estate speculation had its beginning in the 1970s and early 1980s in the south-eastern United States and Southern California (MELLO, SPOLADOR 2004). This paper aims to explain the normal cycle of the housing market during a real estate bubble It is an empirical, exploratory and descriptive study, which uses variables of 101 cities in ten countries, such as Germany, USA, Brazil and Australia. The selection of these cities was based on Gross Domestic Product (GDP) and the number of inhabitants, as well as using indices, e.g. the “housing price to income ratio”, according to CASE (2000), JUD and WINKLER (2002) and NING and HOON (2012) This discussion is needed in order to clarify which variables are useful in determining the actual situation on real estate markets, especially during a bubble phase. Only housing speculation in urban areas (cities) was analyzed because rural housing data, as in the case of Brazil, are not present in all countries
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