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Measuring House Price Bubbles
Author(s) -
Bourassa Steven C.,
Hoesli Martin,
Oikarinen Elias
Publication year - 2016
Publication title -
real estate economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.064
H-Index - 61
eISSN - 1540-6229
pISSN - 1080-8620
DOI - 10.1111/1540-6229.12154
Subject(s) - measure (data warehouse) , house price , economics , asset (computer security) , bubble , economic bubble , econometrics , metropolitan area , simple (philosophy) , capital asset pricing model , microeconomics , financial economics , computer science , monetary economics , data mining , medicine , philosophy , computer security , epistemology , pathology , parallel computing
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.