Real-estate bubble
A real-estate bubble or property bubble (or housing bubble for residential markets) is a type of economic bubble that occurs periodically in local or global real estate markets, and it typically follows a land boom or reduced interest rates.[1] A land boom is a rapid increase in the market price of real property, such as housing, until prices reach unsustainable levels and then decline. Market conditions during the run-up to a crash are sometimes characterized as "frothy." The questions of whether real estate bubbles can be identified and prevented, and whether they have broader macroeconomic significance, are answered differently by different schools of economic thought, as detailed below.[1]
Bubbles in housing markets have often been more severe than stock market bubbles. Historically, equity price busts occur on average every 13 years, last for 2.5 years, and result in about a 4 percent loss in GDP. Housing price busts are less frequent, but last nearly twice as long and lead to output losses that are twice as large (IMF World Economic Outlook, 2003). A 2012 laboratory experimental study[2] also shows that, compared to financial markets, real estate markets involve more extended boom and bust periods. Prices decline slower because the real estate market is less liquid.
The 2008 financial crisis was caused by the bursting of real estate bubbles that had begun in various countries during the 2000s.[3]
- ^ a b Mayer, Christopher (September 2011). "Housing Bubbles: A Survey". Annual Review of Economics. 3 (1): 559–577. doi:10.1146/annurev.economics.012809.103822. ISSN 1941-1383.
- ^ Ikromov, Nuridding and Abdullah Yavas, 2012a, "Asset Characteristics and Boom and Bust Periods: An Experimental Study". Real Estate Economics. 40, 508–535.
- ^ Klein, Ezra (May 28, 2009). "Bill Clinton and the Housing Bubble". Washington Post. Archived from the original on October 15, 2012. Retrieved September 22, 2011.