The Margin of Safety and Turning Points in House Prices: Observations from Three Developed Markets
Posted: 12 Jun 2011
Date Written: June 9, 2011
Using quarterly data from 1960 (United Kingdom), 1963 (United States), and 1977 (Japan) through the second quarter (Q2) of 2010 (all three markets), the authors examined long-run mean-reverting relationships between house prices and inflation, disposable income, GDP, and rents. At the end of Q2 2010, U.S. prices were below their mean-reverting levels and at the lower end of their historical range. Equivalent U.K. and Japanese prices were at or slightly above their mean-reverting levels.
Keywords: Economics, Aggregate Demand and Aggregate Supply, Expectations and Economic Policy, Business Cycles, Widely-Used Measures of Economic Activity, Market Forces of Supply and Demand, Elasticity
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