The Margin of Safety and House Price Turning Points: Observations from the US, the UK and Japan

Posted: 27 Feb 2010

See all articles by Mitsuru Mizuno

Mitsuru Mizuno

Nihon University - Graduate School of Business

Isaac T. Tabner

University of Stirling - Accounting and Finance Division

Date Written: February 22, 2010

Abstract

Using quarterly data from 1960 (UK), 1963 (US) and 1977 (Japan) through 2009 (all three markets) we examine long run mean reverting relationships between house prices and: inflation, disposable income, GDP and rents. We find that at the end of Q3 2009, US prices are below their mean reverting levels and at the lower end of their historic range. In contrast, UK and Japanese prices are at, or slightly above, their mean reverting levels. Furthermore, the expansion in Japanese prices during the late 1980s and early 1990s far surpassed any expansions observed in the US or the UK, over the observation period.

Keywords: Household Finance, House Price Crash, Wealth Transfer, Deflation, Inflation

JEL Classification: D1, D31, D84, D91, E21, E31, E32, G12, R2, R21, R31

Suggested Citation

Mizuno, Mitsuru and Tabner, Isaac T., The Margin of Safety and House Price Turning Points: Observations from the US, the UK and Japan (February 22, 2010). Available at SSRN: https://ssrn.com/abstract=1557161

Mitsuru Mizuno

Nihon University - Graduate School of Business ( email )

Kudanminami 4-8-24
Chiyoda-ku
Tokyo 102-8275
Japan

Isaac T. Tabner (Contact Author)

University of Stirling - Accounting and Finance Division ( email )

Accounting and Finance Division
University of Stirling
Stirling FK9 4LA, Scotland
United Kingdom
44 (0) 1786 467305 (Phone)
44 (0) 1786 467308 (Fax)

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