Measuring House Price Bubbles

30 Pages Posted: 16 Apr 2019

See all articles by Steven C. Bourassa

Steven C. Bourassa

Florida Atlantic University

Martin Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM); Swiss Finance Institute; University of Aberdeen - Business School

Elias Oikarinen

University of Oulu - Oulu Business School; University of Turku, Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: Summer 2019

Abstract

Using data for six metropolitan housing markets in three countries, this article 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.

Suggested Citation

Bourassa, Steven C. and Hoesli, Martin Edward Ralph and Oikarinen, Elias, Measuring House Price Bubbles (Summer 2019). Real Estate Economics, Vol. 47, Issue 2, pp. 534-563, 2019, Available at SSRN: https://ssrn.com/abstract=3372518 or http://dx.doi.org/10.1111/1540-6229.12154

Steven C. Bourassa (Contact Author)

Florida Atlantic University ( email )

777 Glades Road
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Martin Edward Ralph Hoesli

University of Geneva - Geneva School of Economics and Management (GSEM) ( email )

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Switzerland
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Swiss Finance Institute

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University of Aberdeen - Business School ( email )

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United Kingdom
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+41 22 379 8104 (Fax)

Elias Oikarinen

University of Oulu - Oulu Business School ( email )

Finland

University of Turku, Department of Economics ( email )

Turku, FIN-20500
Finland

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