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Detecting Imbalances in House Prices: What Goes Up Must Come Down? *
Author(s) -
Anundsen André K.
Publication year - 2019
Publication title -
the scandinavian journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.725
H-Index - 64
eISSN - 1467-9442
pISSN - 0347-0520
DOI - 10.1111/sjoe.12349
Subject(s) - house price , economics , bubble , economic bubble , norwegian , capital (architecture) , monetary economics , macroeconomics , financial economics , computer science , linguistics , philosophy , archaeology , parallel computing , history
I suggest a toolkit of four bubble‐detection methods that can be used to monitor developments in house prices. These methods are applied to US, Finnish, and Norwegian data. For the United States, all measures unanimously suggest a bubble in the early to mid‐2000s, whereas current US house prices are found to be aligned with economic fundamentals. One of the measures indicates imbalances in Finland, while there are no signs of a bubble in Norway. I find that large parts of the US house price bubble can be explained by the sharp increase in capital inflows and the extension of loans to the subprime mortgage market.