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Are Oust and Kjartan Hrafnkelsson
 
''What is a housing bubble?''
( 2017, Vol. 37 No.2 )
 
 
The aim of this paper is to look at the developments in previous housing price cycles to improve our understanding, and to create a descriptive definition, of what a house price bubble is and to lay the groundwork for future research. A descriptive definition opens a lot of research opportunities with empirical studies of large datasets, such as: How costly are housing price bobbles? Is there a pattern associated with bubbles? Which indicators can be used to identify bubbles? We find the peaks and troughs and study the price movements around these points using two datasets with housing price data. We use one quarterly dataset from 1970 to 2015 for 20 OECD countries, and one yearly set with 6 countries and 2 cities, where 6 of the data series go back to the 1800s. A large housing price bubble has a dramatic increase in real prices, at least 50% during a five-year period or 35% during a three-year period, followed by an immediate dramatic fall in the prices of at least 35%. A small bubble has a dramatic increase in real prices, at least 35% during a five-year period or 20% during a three-year period, followed by an immediate dramatic fall in the prices of at least 20%.
 
 
Keywords: Housing bubble, Bubble, Pricing, Housing, Financial analysis
JEL: E3 - Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data)
R2 - Urban, Rural, and Regional Economics: Household Analysis: General
 
Manuscript Received : Oct 24 2016 Manuscript Accepted : Apr 22 2017

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