Housing Bubble Research Articles

The COVID-19 Housing Boom: Is a 2007–2009-Type Crisis on the Horizon?

While the current housing market remains relatively strong, with housing prices setting records, concerns are growing of a potential housing bubble similar to that of 2007–2009; this paper compares the current housing market environment with that of 2007–2009 and concludes that the many of the factors that caused the 2007–2009 crisis do not exist today. Factors associated with subprime mortgages, poor and non-existent underwriting loan requirements, weak regulatory oversight, exaggerated credit ratings, under-capitalization in the banking sector and excessive speculative activity in the housing market have been addressed by regulation, which is aimed at preventing another financial crisis similar to 2007–2009. Equally important, major fundamental factors affecting real estate valuation are providing support for the housing market and housing prices; these factors are impacting both the demand and supply side of the housing market. The factors include the lack of inventories of homes available for sale, the underproduction of housing, decreased household mobility limiting supply and the increase in housing demand from millennials and institutional investors; these fundamental factors were not evident during the 2007–2009 period. Despite a number of indicators signaling a potential topping out and overvaluation of housing prices, the authors conclude that the fundamental factors will limit the extent that the housing market weakens over the next few years.

Role of credit and expectations in house price dynamics

Using quarterly data for 18 advanced economies from 1991–2020 we estimate a fixed-effects quantile dynamic panel model and provide evidence for non-linearity in the effects of credit, interest rates and expectations on house price growth. We find that excessive credit buildup negatively impacts house price growth during housing busts, whereas low interest rates and expectations, as measured by past house price growth is associated with housing price booms. Using local projections, we also find evidence that these effects persist over multiple quarters.

An exploration of macro-economic determinants of real estate booms and declines in developing countries

An exploration of macro-economic determinants of real estate booms and declines in developing countries

The Austerity Chic Interior, Gen Z, and Millennials' Domestic Dream

This paper reviews domestic spaces completed in the last ten years to address the following research questions: How do Australian Gen Z and millennials in Sydney, who are currently shaping their future life, imagine their home? What are the domestic values and hopes of two generations that had their coming of age in the Information Era, and who naturally embrace digital technology and social media? What do size, scale, material, and technical innovation mean for a climate-conscious group of people that have lived through COVID-19 confinement, an endless real estate bubble, and recurrent economic crises? Grouped in five categories—sharing life, managing climate, naturalised interiors, reusing new materials, and austerity chic—the analysis of the study cases outlines these generations' emerging architectural interests. The five categories also inform a proposal for an interior constructed with fragments of the study cases that illustrates the paper’s conclusions and imagines a possible domestic space for Gen Z and millennials.

A Giant Falls: The Impact of Evergrande on Asian Stock Indexes

The economic growth of China has been driven by the development of its real estate market, especially after the 2008 crisis. This growth is mostly related to the huge housing bubble and growing amounts of sovereign debt that have been redirected to corporations in the sector. Evergrande is one of those corporations; it is a Chinese company in the construction and real estate sector, a global giant with investments in many parts of the world. Its bond default in September 2021 sounded alerts in financial markets. Several news outlets spoke of the “next Lehman Brothers”, and apprehension was very high, especially in Asian markets. This research work aims to evaluate the impact of Evergrande’s bond default on six Asian stock markets, using an event study approach. The results show a strong reaction from the markets towards the event in study, even anticipating it. Furthermore, it is worth mentioning a quick reversion to “normal” behavior, indicating the rapid absorption of information by the markets.

Heuristics and cognitive biases in the housing investment market

PurposeThis paper aims to analyze the heuristics and cognitive biases described by behavioral finance in the investment decision-making process of Portugal’s housing market.Design/methodology/approachIn a first step, the authors applied an exploratory factor analysis (EFA) to assess the impact of heuristics and cognitive biases on investors’ decision-making. In a second step, the authors run a structural equation model (SEM) diagram path to assess if the sociodemographic characteristics of housing market investors determine the identified heuristics and if the heuristics condition the investors’ investment criteria.FindingsHerd behavior and the heuristics of representativeness, availability and anchoring influence the housing market’s investors’ behavior in their decision-making process. Investors with above-average income show higher levels of overconfidence. Investors showing higher levels of overconfidence also tend to be more sensitive to the house price under analysis for investment. Women tend to show higher levels of the availability and anchoring heuristic. In turn, housing market investors showing higher levels of availability and anchoring heuristic tend to be more sensitive to the price and location of the house under analysis for investment.Research limitations/implicationsThe explained variance of the EFA is below 50%, and the root mean square of approximation of the SEM is above the threshold of 0.05. These indicators are evidence of the models’ fragility.Practical implicationsGovernments and regulators can better prevent real estate bubbles if they monitor behavioral biases and heuristics of housing investors together with quantitative indicators. Realtors can profit from adapting their marketing strategy and commercial communication to investors of sociodemographic groups more prone to a specific type of heuristics.Originality/valueTo the best of the authors’ knowledge, this is the first study that combines the contributions of behavioral finance with Portugal’s housing investment market and the first study connecting heuristics to investment criteria.

Whose Heritage

Whose Heritage

How is machine learning useful for macroeconomic forecasting?

SummaryWe move beyond Is Machine Learning Useful for Macroeconomic Forecasting? by adding the how. The current forecasting literature has focused on matching specific variables and horizons with a particularly successful algorithm. To the contrary, we study the usefulness of the underlying features driving ML gains over standard macroeconometric methods. We distinguish four so‐called features (nonlinearities, regularization, cross‐validation, and alternative loss function) and study their behavior in both the data‐rich and data‐poor environments. To do so, we design experiments that allow to identify the “treatment” effects of interest. We conclude that (i) nonlinearity is the true game changer for macroeconomic prediction, (ii) the standard factor model remains the best regularization, (iii) K‐fold cross‐validation is the best practice, and (iv) the is preferred to the ‐insensitive in‐sample loss. The forecasting gains of nonlinear techniques are associated with high macroeconomic uncertainty, financial stress and housing bubble bursts. Furthermore, ML nonlinearities are helpful when considering density forecasts.

Housing financialization as a self-sustaining process. Political obstacles to the de-financialization of the Dutch housing market

The 2007–2009 financial crisis exposed the risks of housing financialization. Yet the political dynamics shaping post-crisis efforts to de-financialize housing have received surprisingly little analysis. The financialization literature posits that de-financialization policies have been hampered by a policy consensus on the desirability of the pre-crisis status quo. I examine this claim through a detailed analysis of Dutch macroprudential policy reforms, which aimed to mitigate housing-related systemic risks. It finds a fragmented rather than coherent policy community, with the central bank and financial conduct authority pushing for ambitious policies. While they influenced reforms during the housing bust (2008–2013), the government ensured that these financial supervisors would remain peripheral to the future determination of these policies. As the subsequent housing market recovery reduced the urgency to reform, supervisors were unable to impose further de-financialization policies. Housing financialization thus appears self-sustaining, by making mortgage-related policies politically too important for the government to consider a significant empowerment of the actors that might challenge it.

Hands over the city: the Mafia, L'Ora and the sack of Palermo

AbstractThe article is a critical investigation of the role played by the Palermo left-wing newspaper L'Ora in uncovering the Sicilian Mafia's urban affairs and property speculation during the sack of Palermo in the 1960s. It pays particular attention to L'Ora's complex narrative concerning the urban Mafia and the many obstacles that the newspaper encountered in its attempt to defend the city. The article aims to explain L'Ora's account of the Mafia as an intersection of violent crime, politics and business. This study uses investigative series and archival sources to explain the emergence of ‘antimafia’ as both concept and political practice in the urban history of Palermo.

Bubble into reallocation: How bubbles improve capital allocation in China

This paper develops a theoretical framework to shed lights on the relations between the segmented financial market and the housing bubble in China. In our framework, capital misallocation across firms plays a central role. The segmented financial market causes discrimination against private enterprises and favoritism to state-owned firms. This biased financial system not only gives rise to capital misallocation across firms but also significantly pushes down the equilibrium interest rate in the formal financial market. The overly low interest rate in the formal financial market causes a rational bubble in a dynamically efficient economy. More importantly, the bubble improves capital allocation across firms by crowding out inefficient investment in the state-owned sector. Despite the role of improving capital allocation, bubbles may still reduce welfare by crowding out aggregate capital.

The first real estate bubble? Land prices and rents in medieval England c. 1300–1500

This paper tests for speculative bubbles in the medieval English property market based on a unique hand-collected dataset from the feet of fines spanning the fourteenth and fifteenth centuries. We focus on asset types where there are sufficiently large numbers of transactions each year to make a long and reliable run of information, and we transform this into annual time-series of prices. We employ a regime switching model that allows for boom and crash episodes to characterise and test for bubble dynamics. The results are consistent with the presence of periodic, partially collapsing speculative bubbles in the market for agricultural land, but there is no such evidence in the context of messuages. Our findings demonstrate that the medieval English property market shares important features with its contemporary counterpart, for instance with the recent so-called ‘barn bubble’.

Floride : du tourisme aux problèmes

Among the fifty states of the American republic, only a very few can project a mystique, a special mythic spirit. From the middle of the nineteenth century, when natural springs and lush foliage attracted some explorers and well-to-do visitors, to the present, when Walt Disney World welcomes many millions of tourists, Florida has offered alluring pleasures. Since the land boom in Miami in the 1920s down to our own day, the state has become home for millions of Northerners and Midwesterners in particular. Very few states have grown faster –too fast, it seems. For the natural basis of harboring so many millions of residents and tourists is buckling under the strain of excessive demands upon resources, and nature is now striking back. The growth upon which Florida has depended for prosperity has become an ecological threat, and the dream of paradise that once drove so many Americans to live in the state is turning sour. Once a source of enormous pride, tourism has become a serious problem for residents and above all for the balance between civilization and nature.

From systematic to systemic risk among G7 members: Do the stock or real estate markets matter?

Stock and housing market systematic risk may be a critical ingredient in the precipitation of systemic risk and hence a financial crisis. However, surprisingly few studies have so far explored the role of their contagion in triggering systemic risk. In this paper, time-varying connectedness is used to measure two-market systematic risks and time-varying Granger-causality is employed to monitor their causal interactions over time. Using quarterly G7 data over a long period covering 1970–2021, our results indicate that these systematic risks both are very volatile. Moreover, the dominant source of causality in the housing systematic risk implies that policies directed against the possibility of a housing bubble, for example, macroprudential toolkits, deserve special emphasis. Finally, given that the duration of the bilateral causality coincides with those in past crises, a dynamic probit model reveals that adopting an expansionary monetary policy with a huge reduction in interest rates may greatly increase the likelihood of a financial crisis.

Auction Competitive Dynamics and Guide (List) Prices in a Bubble Market

The auction literature finds that competition drives price outcomes and has both rational and psychological components. In bubble markets, emotional factors are heightened, potentially impacting on the interaction between the strategic setting of guide prices by auctioneers, competitive bidding and final auction price outcomes, themes not explored in the extant literature. In a real estate bubble, we find evidence that auction prices anchor on guide prices and that any emotional impact on competitive bidding associated with auction fever does not occlude the assimilative role for the guide price as an anchor. Interestingly, however, we find evidence consistent with real estate agents systematically setting guide prices at deep discounts relative to fundamentals, prima facie consistent with a belief in the reversal-of-the-anchoring effect, suggesting their actions may, paradoxically, dampen the effect of the bubble rather than amplify it.

Making the Railways Pay: The Redevelopment of Euston Station, Labour and Conservative Visions of Public Sector Property Speculation in the 1960s and 1970s.

This article examines the redevelopment of Euston Station forecourt as a speculative development of offices designed by the prolific post-war commercial architectural practice R. Seifert & Partners from c.1970 to 1979. The article offers a reading of the development as a piece of state-encouraged, public-sector led property development. It uncovers the encouragement given by Harold Wilson's Labour government to for-profit property developments on nationalized land and the simultaneous control of private sector office development by the same government. It reveals a consistent labourite vision of public sector property development.

Effect of Money Supply, Population, and Rent on Real Estate: A Clustering Analysis in Taiwan

Real estate is a complex and unpredictable industry because of the many factors that influence it, and conducting a thorough analysis of these factors is challenging. This study explores why house prices have continued to increase over the last 10 years in Taiwan. A clustering analysis based on a double-bottom map particle swarm optimization algorithm was applied to cluster real estate–related data collected from public websites. We report key findings from the clustering results and identify three essential variables that could affect trends in real estate prices: money supply, population, and rent. Mortgages are issued more frequently as additional real estate is created, increasing the money supply. The relationship between real estate and money supply can provide the government with baseline data for managing the real estate market and avoiding unlimited growth. The government can use sociodemographic data to predict population trends to in turn prevent real estate bubbles and maintain a steady economic growth. Renting and using social housing is common among the younger generation in Taiwan. The results of this study could, therefore, assist the government in managing the relationship between the rental and real estate markets.

Skyrocketing Home Prices and The Global Housing Crisis Today

Based on overwhelming evidence from data analysis the researcher concluded with absolute certainty, the Global Financial Crisis, the worldwide economic collapse, and the Great Recession were not caused by subprime mortgage lending. The current study concluded, the Global Financial Crisis of 2007 and 2008 was caused by the destruction of the subprime mortgage industry. The politicization of misinformation gave investors shorting mortgage-back securities an opportunity to take advantage of the mood of the country resulting from corporate mistrust that stemmed from the corporate reporting scandal a few years before the beginning of the financial crisis in 2007. Overwhelming evidence from data analysis in the current study suggested subprime mortgage lending did not cause an increase in the national mortgage delinquency rate. The narrative, individuals purchased homes they could not afford preceding the Global Financial Crisis was completely debunked based on the evidence presented in the current study. The evidence suggested subprime lending resulted in significantly lower mortgage delinquency rates preceding the financial crisis. The end of subprime lending resulted in skyrocketing national mortgage delinquency rates years after the subprime lending industry in the United States had been destroyed by misinformation. Mistakes by policymakers in the United States government significantly worsened the financial crisis leading to an acceleration of mortgage delinquencies across the country. The consensus among the political establishment, the media, big tech, and academia failed to raise questions regarding the false narrative of unscrupulous lending and the false conclusion of a real estate bubble. The evidence from data analysis suggested the entire narrative about subprime mortgage lending and the real estate bubble was misinformation used for politicization in the 2008 United States Presidential Election similar to the politicization of COVID-19 policies in the 2020 United States Presidential Election. Misinformation has put the global economy at significant risk. The continued rapid increase in home prices around the world today, is a direct result of the misinformation that caused the Global Financial Crisis, the worldwide economic collapse, and the Great Recession. Moderate-income families around the world today are at risk of being priced out of the housing market as increased home prices lead to rapid increase in rental housing. Higher education has used the misinformation that caused the Global Financial Crisis as justification to develop unethical business ethics and organizational behavior curriculums based on the false narrative creating a negative image of capitalism for students based on a false narrative. Capitalism is under attack from costly corporate social responsibility (CRS) and business ethics policies that put stockholder profits secondary to corporate political activism, which have been developed largely based on the misinformation about the cause of the Global Financial Crisis. Mainstream media and big-tech continued misinformation have become the most significant risk facing the global economy today. The misinformation must be addressed to avoid another global economic crisis such as the economic crisis caused by misinformation about the cause of the Global Financial Crisis of 2007 and 2008, and the misinformation that led to COVID-19 policies in 2020 that caused significant economic destruction.

서울 아파트 가격은 거품인가?*

This study analyzed whether the rise in apartment prices in Seoul could be interpreted as a housing bubble since 2017. In terms of the fact that the housing price bubble was difficult to be explained by observable changes in the market environment, this study examined the explanatory power of the endogenous relationship between the change in housing prices and economic variables in the pertinent period. To do so, this study set a model which interpreted how far the rate of change in actual housing prices deviated from the explainable change in basic market environments and applied the model to housing bubbles right before the U.S. subprime crisis (the early and mid 2000’s) and to apartment markets in Seoul after 2017. According to the result, the increase of housing prices in the U.S. markets in the mid 2000’s significantly exceeded the rise anticipated by the change in markets, while the change in apartment prices in Seoul was not considerably different from the conditions that were explained by the change in market circumstances. This suggested that the rise in housing prices in Seoul was caused not by bubbles from excessive expectations or self-realizing predictions but by factors affecting changes in the fundamental values for housing, such as government interventions or monetary policies.

맞서고 생성하는 섬

The pioneering of Hokkaido in the 19th century was aimed at acquiring the resources necessary for modernization and industrialization of the Japanese mainland. During World War I and II, the Japanese government’s interest in Hokkaido weakened, but when overseas colonies were lost after World War II, the Japanese government once again actively began to develop Hokkaido. The Japanese government sought to improve Hokkaido’s lagging infrastructure by investing more budget in Hokkaido than in other regions. The purpose of such a policy was to close the regional gap, but more importantly, to build Hokkaido, which contributed to the mainland. As a result, however, Hokkaido has gotten a socio-economic system that relies excessively on the mainland, and politicians in Hokkaido have become more eager to win central government budgets than to offer prospects for independent system. Under such a structure, Hokkaido failed to lay a proper industrial foundation and the collapse of the real estate bubble caused the bankruptcy of Hokkaido’s largest bank in the 1990s. In the 2000s, Hokkaido was gradually shrinking, with its population decreasing and growth slowing. However, the current situation in Hokkaido is not just gloomy. This is because the movement to seek an alternative future is in full swing as it is clear that the growth-oriented development strategy that has gripped Hokkaido is no longer possible.