37 Pages Posted: 16 Jan 2016
Date Written: January 6, 2016
Using data for six metropolitan housing markets in three countries, this paper 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.
Keywords: Housing; Bubble; Overvaluation; Asset Pricing; Price-Rent Ratio; Policy Measures
JEL Classification: R31; G12; E58
Suggested Citation: Suggested Citation
Bourassa, Steven C. and Hoesli, Martin and Oikarinen, Elias, Measuring House Price Bubbles (January 6, 2016). Swiss Finance Institute Research Paper No. 16-01. Available at SSRN: https://ssrn.com/abstract=2715632 or http://dx.doi.org/10.2139/ssrn.2715632