Bubble, Bubble, Toil, and Trouble
20 Pages Posted: 9 Feb 2007
The rapid rise of real estate prices in recent years has led to fears of a housing price bubble. But, to determine whether there has been a bubble - and whether the bubble is bursting - one needs to know what home prices should be. The authors estimate a simple model of home prices and find that prices were, on average, above their predicted levels during 2000-2006. However, this result does not hold true uniformly across the country. To the extent that prices were overheating, this was happening largely in markets that have traditionally exhibited volatile prices.
Keywords: housing, bubble, home prices, real estate, Housing Demand, Housing Supply and Markets
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