Measuring House Price Bubbles

Steven C. Bourassa, Martin Hoesli, Elias Oikarinen

Research output: Contribution to journalArticleScientificpeer-review

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 and then 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 house price increases.
Original languageEnglish
Pages (from-to)534-563
Number of pages30
JournalREAL ESTATE ECONOMICS
Volume47
Issue number2
Early online date2017
DOIs
Publication statusPublished - 2019
MoE publication typeA1 Journal article-refereed

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