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Assessing Housing Market Crashes over the Past 150 years

Author

Listed:
  • George Dotsis

    (National and Kapodistrian University of Athens)

  • Panagiotis Petris

    (National and Kapodistrian University of Athens)

  • Dimitris Psychoyios

    (University of Piraeus)

Abstract

We assess the predictability of housing market crashes in 18 countries over the years 1870–2020. We find that the rent-to-price ratio is a leading indicator and the most significant predictor of housing market crash episodes. The stance of monetary policy, as proxied by the short-term interest rate, is also an important determinant of the probability of housing market crashes in the post WW2 period. Lower rent-to-price ratios and higher short-term interest rates increase the probability of housing market crashes. In the post-80 s period which is characterized by a significant increase of mortgage lending to households mortgage growth is also an important factor that elevates the probability of crashes in housing prices.

Suggested Citation

  • George Dotsis & Panagiotis Petris & Dimitris Psychoyios, 2025. "Assessing Housing Market Crashes over the Past 150 years," The Journal of Real Estate Finance and Economics, Springer, vol. 70(2), pages 359-377, February.
    • Handle: RePEc:kap:jrefec:v:70:y:2025:i:2:d:10.1007_s11146-023-09960-1
    DOI: 10.1007/s11146-023-09960-1
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