When is a Housing Market Overheated Enough to Threaten Stability?

Date: 27 April 2016

In many economies, housing prices are subject to boom-bust cycles and in some cases these cycles are linked to severe economic and financial instability. Overheating can have both a price and a quantity dimension, but it is likely that they are linked by common drivers. It is helpful to make the distinction between housing prices overshooting due to extrapolative expectations and ‘frenzy’, given fundamentals, and shifts in possibly fragile fundamentals. The contribution of careful econometric modelling to estimating the effects of the former is demonstrated: central banks or other policymakers should institute quarterly surveys of housing price expectations of potential housing market participants to help assess the first type of overshooting.

John Muellbauer

Economic Modelling Employment, Equity and Growth

When is a Housing Market Overheated Enough to Threaten Stability?


Type: working-paper

Muellbauer, J. (2012). 'When is a Housing Market Overheated Enough to Threaten Stability?'. In A. Heath, F. Packer & C. Windsor (Eds.) "RBA Annual Conference Volume". Australia: Reserve Bank of Australia. pp.73-105.


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