Bubbles in Metropolitan Housing Markets

27 Pages Posted: 5 Sep 2001 Last revised: 27 Jul 2010

See all articles by Jesse M. Abraham

Jesse M. Abraham

National Bureau of Economic Research (NBER)

Patric H. Hendershott

University of Aberdeen - Centre for Property Research; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 1994

Abstract

A commonsense and empirically supported approach to explaining metropolitan real house price changes is for the theory to describe an equilibrium price level to which the market is constantly adjusting. The determinants of real house price appreciation, then, can be divided into two groups, one that explains changes in the equilibrium price and the other that accounts for the adjustment dynamics or changing deviations from the equilibrium price. The former group includes the growth in real income and real construction costs and changes in the real after-tax interest rate. The latter group consists of lagged real appreciation and the difference between the actual and equilibrium real house price levels. Either group of variables can explain a little over two-fifths of the variation in real house price movements in 30 cities over the 1977-92 period; together, they explain three-fifths.

Suggested Citation

Abraham, Jesse M. and Hendershott, Patric H., Bubbles in Metropolitan Housing Markets (June 1994). NBER Working Paper No. w4774. Available at SSRN: https://ssrn.com/abstract=282423

Jesse M. Abraham

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Patric H. Hendershott (Contact Author)

University of Aberdeen - Centre for Property Research ( email )

Aberdeen AB24 2UF
Scotland

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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