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Is There a 'Bubble' in the Housing Market Now?

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  • Jonathan McCarthy
  • Richard W. Peach

Abstract

Real home prices have been rising strongly since the mid-1990s, and have continued to do so even as the economy has weakened. This has sparked the concern as to whether there is a bubble in the housing market, the collapse of which could harm the overall economy. Taking into account fundamentals – including more appropriate price indices and interest rates – aggregate home prices are relatively high but not yet out of line. Home prices in some areas still may be set for a fall; however, prices in these areas typically have been volatile. Previous large home value declines in these areas have not had a sizable negative effect on the aggregate economy.

Suggested Citation

  • Jonathan McCarthy & Richard W. Peach, 2005. "Is There a 'Bubble' in the Housing Market Now?," NFI Policy Briefs 2005-PB-01, Indiana State University, Scott College of Business, Networks Financial Institute.
    • Handle: RePEc:nfi:nfipbs:2005-pb-01
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    File URL: http://www.indstate.edu/business/sites/business.indstate.edu/files/Docs/2005-PB-01_McCarthy_Peach.pdf
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    References listed on IDEAS

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    Cited by:

    1. Béchir Bouzid, 2010. "Titrisation des emprunts hypothécaires et bulle immobilière aux États-Unis : les origines d’une débâcle," Revue d'Économie Financière, Programme National Persée, vol. 97(2), pages 101-142.
    2. James A. Kahn, 2009. "Productivity swings and housing prices," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 15(Jul).
    3. Panzera, Fabio S., 2011. "Price stability and financial imbalances: rethinking the macrofinancial framework after the 2007-8 financial crisis," FSES Working Papers 423, Faculty of Economics and Social Sciences, University of Freiburg/Fribourg Switzerland.
    4. Efthymios Pavlidis & I Paya & D Peel & A M Spiru, 2009. "Bubbles in House Prices and their Impact on Consumption: Evidence for the US," Working Papers 601552, Lancaster University Management School, Economics Department.

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