Housing Bubble Research Articles

Asset bubbles in explaining top income shares

This paper considers the role of asset price bubbles (crashes) as an important determinant in seeking a further explanation for top income shares. The asset price bubbles caused at least in part by monetary policies, along with other determinants such as top tax rates and innovativeness are the important drivers to explain the surge in top income shares. The empirical results show that correlation between asset bubbles and top inequality is positive and significant. The regression coefficient of stock and housing market bubbles have a positive effect on top income shares, while the stock and housing market crashes fail to reduce the surge in top income shares. In sum, as the asset markets grow, the share of income going to those at the very top increases and the accumulation of income accelerates if the duration of bubbles expands. Concentration of income at the very top is much more important when capital gains are counted as income.

Dynamical characteristics of global stock markets based on time dependent Tsallis non-extensive statistics and generalized Hurst exponents

We perform non-linear analysis on stock market indices using time-dependent extended Tsallis statistics. Specifically, we evaluate the q-triplet for particular time periods with the purpose of demonstrating the temporal dependence of the extended characteristics of the underlying market dynamics. We apply the analysis on daily close price timeseries of four major global markets (S&P 500, Tokyo-NIKKEI, Frankfurt-DAX, London-LSE). For comparison, we also compute time-dependentGeneralized Hurst Exponents (GHE) Hq using the GHE method, thus estimating the temporal evolution of the multiscaling characteristics of the index dynamics. We focus on periods before and after critical market events such as stock market bubbles (2000 dot.com bubble, Japanese 1990 bubble, 2008 US real estate crisis) and find that the temporal trends of q-triplet values significantly differ among these periods indicating that in the rising period before a bubble break, the underlying extended statistics of the market dynamics strongly deviates from purely stochastic behavior, whereas, after the breakdown, it gradually converges to the Gaussian-like behavior which is a characteristic of an efficient market. We also conclude that relative temporal variation patterns of the Tsallis q-triplet can be connected to different aspects of market dynamics and reveals useful information about market conditions especially those underlying the development of a stock market bubble. We found specific temporal patterns and trends in the relative variation of the indices in the q-triplet that distinguish periods just before and just after a stock-market bubble break. Differences between endogenous and exogenous stock market crises are also captured by the temporal changes in the Tsallis q-triplet. Finally, we introduce two new time-dependent empirical metrics (Q-metrics) that are functions of the Tsallis q-triplet. We apply them to the above stock market index price timeseries and discuss the significance of their temporal dependence on market dynamics and the possibility of using them, together with the relative temporal changes of the q-triplet, as signaling tools for future market events such as the development of a market bubble.

Aging, housing markets and social inclusion: Insights from India

In this piece, I draw attention on how the booming real estate market in India is patterned around the axes of social inequality. Specifically, it argues that in a socio-economic context of depressed later life incomes with declining familial support, a singular focus on (upper) middle class niche senior living market is both exclusionary and misguided. The empirical basis for this argument comes from a range of press coverage on the inviting market for seniors as well as the recently released Government of India report (Model Guidelines for Development and Regulation of Retirement Homes, Ministry of Housing and Urban Affairs, 2019) on the regulatory framework for privately managed ‘retirement homes’ for the ‘urban upper and middle income elderly’. I ask if the Report with its orchestration of an upper middleclass lifestyle and aesthetic governmentality is a deliberate neglect of the economic precariousness of a vast majority of lower-income households that lie at the margins of the urban-focused neoliberal State. I reflect what this erasure holds for questions of equity and social justice under neoliberalism and conclude on the intellectual possibilities of environmental gerontology by privileging the anthropological dimensions of housing and property regimes.

Inequality on the Increase: Trajectories of Privilege and Inequality in Madrid

In Spain, housing is one of the main axes of social inequality. Its position within Spain’s economic model and welfare system is key to understanding why its financialization at the beginning of the 21st century had such different consequences among residents as well as territorially. In this context, from 2001 to 2011, Madrid became one of the most segregated metropolitan areas in Europe. This article delves into how both housing and its location organise inequality in different social spheres and reproduce it over time. To this end, the geography of this inequality is analysed in different social residential trajectories, along with how segregation produces its own dynamics of inequality. The analysis is based on census data and applies a combination of factor and cluster analyses. The results reveal important processes of social residential marginalisation articulated by the interaction between high international immigration and the spatial manifestation of the housing bubble. The main socio-spatial result of this process is the disappearance of mixed social spaces in Madrid, previously located in the centre of the city. This dynamic produces opposite territories in terms of advantage and disadvantage in different spheres linked to social inequality such as education, health, leisure, care and even prejudice. In the process, impoverished immigrants disperse towards the neighbourhoods that concentrate the greatest disadvantages in each of these spheres.

Appraising the Economic Growth Prospects of China’s Services Sector

This article examines the economic growth prospects of China’s services sector. Reportage on China’s economy and its data releases tends to focus largely on aggregate GDP growth, manufacturing growth, retail sales and investments, and fails to adequately cover services despite them being the largest contributor to growth. The article parses the growth of China’s various services subcomponents across a range of parameters and assesses that the industry has come under duress with a slowdown in complementary manufacturing and the dissipation of growth bubbles in finance and real estate. It is further observed that reforms necessary for spurring services growth are at a nascent stage, proceed slowly, and are imperilled by GDP growth targets that result in policies favouring the manufacturing industry. In sum, while China’s services growth prospects are hardly in dire jeopardy due to favourable demand-side conditions, achieving potential and affecting convergence with high income countries will necessitate the expedition of reforms and the engineering of a sustained high growth phase in the sector.

외국인직접투자가 중국 부동산시장에 미치는 효과에 관한 실증 연구

In this paper, we attempt to examine the effects of foreign direct investment in real estate (FDIRE) on the housing prices in China. We employ ARDL (AutoRegressive Distributed Lag) bound test (Pesaran et al. 2001) to investigate the long-rum relations between macroeconomic variables. We use FMOLS (Phillips and Hansen, 1990) and DOLS (Stock and Watson, 1993) to calculate the individual cointegration vectors. We select four categories of commercial residence buildings as dependent variables, namely, business, commodity, residence and office buildings. Based on existing literature, we employ four macroeconomic variables as independent variables, i.e. interest rate, exchange rate of RMB to US dollars, FDIRE and industrial growth ratio as proxy variable of GDP. We find that the FDIRE has a significant negative effect on the real estate prices in China. This implies the Chinese government should keep providing favorable conditions for more FDIRE to stabilize the booming real estate market in China.

Regulating Demand or Supply: Examining Israel’s Public Policy for Reducing Housing Prices During 2015–2019

ABSTRACT The considerable rise in housing prices in Israel from 2008 to 2018, after the stagnation (and drop) in their prices in the early 2000s, placed concern about a real estate bubble in the Israeli economy on the public agenda. This study examines the effects of Israeli public policy on the real estate industry in general and on housing prices in particular during 2016–2020 to try to determine the most efficient way to regulate housing prices in an economy whose demographics create a gradually increasing natural demand for housing. Is it desirable to promote policy steps that act to curb and regulate demand, or would it be more efficient to promote a plan to increase the supply of housing? The findings show that the public policy formulated and implemented in Israel in these years did not achieve its long-term goal of reducing housing prices; rather, it only halted the price rise in the short term. The policy was clearly affected by shortsighted political considerations. It is therefore possible that the choice between regulating demand and regulating supply in the housing industry may in fact reflect the choice between the wide public interest and the narrow personal interest of policy designers.

THE SPECIAL EFFECT OF INTEREST RATE CUTS ON HOUSING PRICES

This study uses theoretical models and empirical research to explain that interest rates affect the structure of housing price formation and correction rather than affect the price alone. In particular, when interest rates are substantially reduced, the correction of housing prices toward fundamentals is absent; in other words, a housing bubble is likely to occur. This study first illustrates a model for explaining home price behavior. Data from the Case-Shiller U.S. National Home Price Index between January 1975 and August 2020 are adopted to observe the behavior of home prices. The empirical results show that the correction and bubble behavior of U.S. home prices have exhibited significant structural changes. Variation in money supply fails to explain the structural changes, however, interest rate variation can significantly affect the structural changes. According to the results, when interest rates rise or fall slightly, the correction of home prices toward the equilibrium value is significant. However, when interest rates fall substantially, the bubble behavior of home prices is significant. For governments that adopt low interest rates to revitalize the economy, the results of this study provide special reference values. Governments should provide additional intervention in housing markets when an extremely low interest rate exists.

Indirect and direct effects of the subprime crisis on the real sector: labor market migration.

The bursting of the US housing bubble in the second half of 2008 triggered an almost unprecedented systemic crisis in the world economy. The financial collapse quickly overflowed into the real economy and caused, among other effects, a sharp fall in the flow of world trade. Using export data from Brazilian municipalities, we show that the subprime crisis had a more significant effect on production and employment in exporting cities than municipalities more devoted to the domestic economy. We find that the manufacturing and construction sectors of exporting cities were the most affected during the crisis. However, exporting municipalities with a substantial share of services activities were more resilient to the external crisis. This difference is significant and sheds light on the debate on the effects of the crisis on Brazilian regions and cities. Using a unique business management dataset that contains firm-to-firm controls, we also find spillovers in the labor market from exporting to domestic-oriented cities through job reallocation. Our results suggest that workers migrate from exporting municipalities to other non-exporting municipalities within the same firm economic group.

Real Estate Boom and Firm Productivity: Evidence from China

AbstractStudies on the relationship between housing prices and firm behaviours have focused on the relationship between housing prices and firm financing and investment decisions. However, housing prices may affect other firm decisions. This study investigates the impact of housing prices on manufacturing firm productivity in China. To identify the causal effect, we use a national land regulation policy and city‐level developable land area as exogenous sources of variation in housing prices. Using an instrumental variable approach to regression analysis and firm‐level data, we find that a 10% increase in housing prices leads to a 2.1% reduction in manufacturing firms' total factor productivity (TFP). An important transmission channel is the inflow of bank credit to the real estate market caused by rising housing prices, thus crowding out loans to manufacturing firms. Due to China's distinctive dual‐track land market, rising housing prices do not translate into an increase in the price of industrial land; therefore, collateral values for manufacturing firms do not increase. We further find that the negative effect of housing prices on TFP is more pronounced for firms with greater external financial dependence or greater financial constraints.

The use of ‘bubble’ as an economic metaphor in the news: The case of the ‘real estate bubble’ in Spain

This article analyses the emergence of the bubble metaphor and how it quickly became a widely used metaphor in the world of trade and finance since the early 18th century. The paper traces the evolution of the meaning of this economic metaphor and its popularization at different times in history, especially around periods of financial boom and crisis. Taking as a reference its current use, the study also analyses how these different significant dimensions of the economic metaphor of the bubble are used in the Spanish press, when covering the boom and the real estate crisis of 2008. Finally, the article identifies some paradoxes and inconsistencies in the use of the conceptual metaphor of the bubble in complex economic circumstances, such as a real estate boom and crash.

The effect of the housing crisis on the finances of central cities

In 2015, eight years after the start of the Great Recession, average per capita revenue in the nation's largest central cities was 7% below pre-recession levels, a decline that in both depth and duration is the most severe in the post-war period. In this paper, we address the role of the housing market in this decline. We analyze the impact of the boom and subsequent collapse in housing prices and the unprecedented surge in mortgage foreclosures on the finances of central cities. To link city finances to housing conditions, we draw on a specially created data base that takes account of the revenues and spending of all the local governments that provide services to city residents. Our regression analysis, which employs data from 2000 through 2014 for 90 large central cities, finds statistically and economically significant effects of both housing price changes and foreclosure rate changes on property tax revenues. We also find that property tax levy limits dampened the fiscal response to the housing bubble and bust. During the housing bubble period, property tax revenues and capital expenditures rose significantly faster in non-levy limit cities than in cities subject to levy limits, but then fell more sharply during the housing bust period. We estimate that the direct effect of the housing bust was responsible for 21% of the decline in the general revenue of large central cities from 2009 to 2011.

House Prices and the Credit-Driven Household Demand Channel: The Case of the Irish Economy

The performance of the Irish economy stands out across western economies over the past two decades as the later years of its “Celtic Tiger” phase gave way to a sharp and extremely large economic downturn between 2008 and 2012. This severe recession has been followed by a Lazarus-style economic recovery in recent years. This paper examines the role played by the credit-driven housing net worth channel in the path that Irish economic performance has taken between 2002 and 2019 by specific reference to developments in the domestic labour market. We find a significant positive relationship between housing net worth and employment growth in Ireland, manifesting itself through the non-traded sector of the economy between 2007 and 2012. This followed the emergence and then bursting of a substantial credit-fuelled housing market bubble in the Irish residential property market. Our analysis indicates no evident link between economic activity and a credit-driven housing net worth channel in recent years. This may reflect market and regulatory responses to the banking crisis-led recession of the late 2000s and early 2010s.

CO2 emissions of the construction sector in Spain during the real estate boom: Input–output subsystem analysis and decomposition

AbstractThe construction sector is of special interest within the Spanish economy, given its large economic dimension and environmental impact, particularly during the real estate boom prior to the last economic crisis that started in 2008. We study the CO2 emissions of construction activities in 2007, at the height of the construction boom, in the context of the productive structure of Spain. For this, we use an input–output subsystem method, which allows us to study the productive structure of the subsystem's activities, taking into account its links with the rest of the sectors. The decomposition of total emissions in four explanatory components allows us to make a classification of the different sectors according to the type of relationships that are established between the subsystem and the rest of the economy. Besides providing a better understanding of the environmental consequences of real state booms, we derive some implications for environmental policy from the analysis of these interrelations.

Detecting multiple bubbles in the Seoul housing market based on GSADF test

본 연구는 한국의 서울시 25개 지역구의 다중거품의 존재여부를 검정한다. 분석시점은 2002년 12월부터 2020년 4월까지의 월별자료를 이용하였다. 본 연구는 현재가치모형을 토대로 GSADF 검정을 통해 분석한다. GSADF test 결과 서울 25개지역구 중 21개 지역구에서 2-5개의 다중거품이 존재했다. 그리고 이러한 다중거품은 평균 9개월동안 지속되었다. 강남지역과 비교해서 강북지역에서 더 많은 다중거품이 발견되었으며 거품의 지속기간 또한 강북지역이 더 높게 나타났다. 한편 시점별로 보면 2015년 이전에는 강남지역에서는 거품이 발견되지 않았으나 강북지역의 경우에는 2006년과 2012년으로 거품시작시점이 두가지로 나타났다. 그러나 2015년부터 2019년까지는 서울시 25개 모든 지역구에서 거품이 나타났다.

Banking reforms and bank efficiency: Evidence for the collapse of Spanish savings banks

This paper analyzes the impact of the banking system reform implemented through the banking consolidation (mergers and acquisitions) carried out in Spain to address the collapse of savings banks. The 2008 global financial crisis triggered a sovereign debt crisis in Europe and the burst of a real estate bubble in Spain, and forced a government intervention, despite policymakers not yet having developed a clear guidance for addressing banking crises. We therefore explore to what extent the efficiency of the Spanish financial system increased as the troubled savings banks merged with each other and/or were acquired by healthy savings or commercial banks. Our findings show that this Spanish banking reform impacts positively on the banking performance in terms of both bank efficiency and bank solvency. Consequently, banking reform via M&A drives out unviable banks and is a feasible alternative that minimizes the negative effects of government interventions in the financial systems.

Who Has Benefited? A Socio-Ecological Chronology of Urban Resilience in the Early Reconstruction of Talca after the 27-F Earthquake, Chile 2010–2012

This article engages in the understanding of resilience from the perspective of socio-ecological systems (SES) and the reconstitution of events of recovery and reconstruction in the city of Talca after the 27-F earthquake in Chile, between 2010 and 2012. For such purposes, we have developed a chronological or timeline-analysis model. This methodology, which uses mostly ethnographic and participant-observation techniques to recapitulate these events, observes the interaction of social agents, elements of the built environment, government institutions, and other institutional functions of the urban domain within the socio-ecological panarchy. The results suggest that key events, such as local government institutional actions, the observation of probable property speculation events, and community agency efforts dismissal, among other factors, could alter both human and natural resilience processes. In turn, this could affect the capacity of this city, its inhabitants, and its social institutions to endure future crises, as a product of deteriorated and maladaptive resilience mechanisms, aside from the natural and geographical conditions of Chile, exposed to future earthquake events. Likewise, the partial loss of the civic environment in this historic city and weakened neighborhood networks, contrasting with the redevelopment of real estate in central areas, altogether portray considerable risks with regard to the (un)generated social mechanisms of resilience, affecting future developments. The final section focuses on discussing these findings and their relevance in integrating a coherent understanding of SES resilience in urban planning and governance practice, especially in cities or urban areas that are prone to natural risks or catastrophes.

NEITHER ABSOLUTISM NOR NEGOTIATION: SPANISH EMPIRE BUILDING AND POLITICAL ECONOMY IN THE 18THCENTURY CARIBBEAN

ABSTRACTThis paper revisits the political economy during Spanish rule in America by reappraising the allegedly positive impact that intra-imperial transfers (situados) had on the Caribbean economy. It raises concerns concerning categories such as bargaining and absolutism and their accuracy in accounting for the nature of Spanish imperial rule. Three main findings are reported. Firstly, it seems inaccurate to hold that all remittances were injected into the economy with positive effects. Liquidity apparently provoked a real estate bubble. Secondly, the local market was not necessarily sensitive to the arrival of bullion. Finally, jurisdictional fragmentation allowed the king to issue debt in a disorderly fashion and with no constraints, and local officials and groups of interests to behave as free riders.

Detection of price bubbles in Istanbul housing market using LSTM autoencoders: a district-based approach.

Since the early 2000s, there has been a long-term price increase trend in the Istanbul housing market, and this situation also has led to price bubble speculations. Since the housing sector was caught with a high level of unsold housing stock to the economic slowdown emerging in the second half of 2018, housing price bubble speculations have increased even more, especially for the Istanbul market. In this period, housing loan interest reduction campaigns were implemented by the government through state banks to stimulate the housing demand, and a probable collapse in the housing market was prevented. On the other hand, house prices continued to rise during this period due to the stimulated demand. In this paper, we perform a price bubble research on the selected districts in the Istanbul housing market over the 2007–2019 period using LSTM autoencoder model. The first analysis on monthly data is performed by using housing price index, housing rent index, consumer prices index, stock market index, return on government debt securities, USD/TRY exchange rates, BIST price index, monthly deposit interest rates, mortgage interest rates and consumer confidence index, and the second analysis on quarterly data is carried out by adding building construction cost index and GDP data to the previous dataset. In the first analysis, the bubble formations differ regionally and periodically and disappeared toward the end of 2019 in some districts, while in the second analysis, the housing bubble formations have a more common and continuous appearance. Experimental results show that LSTM autoencoder model can be used to detect housing bubbles effectively.

This time is the same: like the housing bubble, the Fed is ignoring the shale bubble in plain sight

We are now far advanced into the third central bank generated bub-ble of the last two decades, but our monetary politburo has taken no notice whatsoever of its self-evident leading wave. Namely, the massive malinvestments and debt mania in the shale patch.
 Call them monetary bourbons. It is no exaggeration to say that inhabitants of the Eccles Building deserve every single word of Talleyrand’s famous epithet: «They learned nothing and forgot nothing».
 To wit, during the last cycle they claimed to be fostering the Great Moderation and permanent full employment prosperity. It didn’t work. When the housing and credit bubble blew-up, it washed out all the phony gains from the Greenspan/Bernanke printing spree. By the time the liquidation was finished in early 2010, there were 2 million fewer payroll jobs than there had been at the turn of the century.
 Never mind. The Fed simply doubled-down. Instead of expand-ing its balance sheet by 50%, as happened during the eight years between 2000 and 2008, it went into monetary warp drive, balloon-ing its made-from-thin-air liabilities by 5X in only six years.