The Margin of Safety and Turning Points in House Prices: Observations from Three Developed Markets
Posted: 12 Jun 2011
Date Written: June 9, 2011
Abstract
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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