Bubble real estate or balloon property (or housing bubble for the housing market) is a type of economic bubble that occurs periodically in local real estate or global property market , and usually follow land boom . The explosion of land is a rapid increase in real estate market prices such as housing to reach unsustainable levels and then decline. The questions of whether the real estate bubble can be identified and prevented, and whether the bubble has broader macroeconomic significance, are answered differently by the schools of economic thought, as described below.
Bubbles in the housing market are more important than stock market bubbles. Historically, the decline in the price of equity occurred on average every 13 years, lasting for 2.5 years, and generating about 4 percent loss in GDP. The price of housing prices is less frequent, but it survives almost twice as long and causes twice as much output losses (IMF World Economic Outlook, 2003). Recent laboratory experimental studies also show that, compared to financial markets, the real estate market involves longer periods of boom and bust. The price decline is slower because the real estate market is less liquid.
The 2007-2008 financial crisis is related to the explosion of real estate bubbles that had started in various countries during the 2000s.
Video Real estate bubble
Identification and prevention
As with any type of economic bubble, disagreement lies in whether real estate bubbles can be identified or predicted, then it may be prevented. The speculative bubble is persistent, systematic, and the rise in the actual price deviation from its fundamental value. Bubbles are often difficult to identify, even after the fact, due to difficulty in accurately predicting intrinsic values.
In real estate, fundamentals can be estimated from the lease (where real estate is then considered equal to stocks and other financial assets) or based on actual price regression on a set of demand and/or supply variables.
In the mainstream economy, it can happen that real estate bubbles can not be identified when they occur and can not or should not be prevented, with government policies and central banks preferring to clean up after bubble bursts.
American Economist Robert Shiller of the Case-Shiller Home Price Index housing prices in 20 metro cities across the United States indicated on May 31, 2011 that "Home Price Double Dip confirmed" and British magazine The Economist, the housing market can be used to identify real estate bubbles. Some argue further that governments and central banks can and should take action to prevent bubbles from forming, or to deflating existing bubbles.
Maps Real estate bubble
Macroeconomics significant
In the mainstream economy, the economic bubble, and especially the real estate bubble, is not considered a major problem. In some heterodox economic schools, on the contrary, real estate bubbles are considered very important and are a fundamental cause of the financial crisis and subsequent economic crisis.
The pre-dominant economic perspective is that the economic bubble generates a temporary boost in wealth and wealth redistribution. When prices increase, there is a positive wealth effect (property owners feel richer and spend more), and when they decline, there is a negative wealth effect (property owners feel poorer and spend less). These effects can be smoothed by counter-cycle monetary and fiscal policies. The final effect on the owner who buys before the bubble is formed and not sold is zero. Those who buy when low and sell high profits, while those who buy high and sell low (after the bubble has exploded) or held until the price drops the lost money. This redistribution of wealth has little macroeconomic significance.
In some heterodox economic schools, especially the Austrian economy and Post-Keynesian economics, real estate bubbles are seen as examples of credit bubbles (degrading, speculative bubbles), since property owners generally use borrowed money to purchase property, in the form of mortgages. This was then debated to cause a financial crisis and economic crisis. It was first debated empirically - many real estate bubbles have been followed by an economic downturn, and he argues that there is a causal connection between the two.
The Post-Keynesian theory of debt deflation takes a demand-side view, arguing that property owners not only feel wealthier but borrow to (i) consume to increase their property values ​​- by taking home equity credit lines, for example; or (ii) speculate by buying property with borrowed money in the hope of increasing its value. When bubbles erupt, property values ​​decrease but not the level of debt. Loan repayment or loan default costs decrease aggregate demand, he argues, and is the immediate cause of the subsequent economic downturn.
Housing market indicators
House size price is also used in identifying housing bubbles; this is known as the home price index (HPIs).
The series of HPIs recorded for the United States is the Case-Shiller index, compiled by American economist Karl Case, Robert J. Shiller, and Allan Weiss. As measured by the Case-Shiller index, the US experienced a housing bubble peaked in the second quarter of 2006 (2006 Q2).
Latest real estate bubble
The fall of Japan's asset price bubble from 1990 has severely damaged the Japanese economy. The accident in 2005 affected Shanghai, the largest city in China.
In 2007, the real estate bubble has existed in the past or is widely believed to still exist in many parts of the world, especially in Austria, the United States, Malta, Argentina, England, Jamaica, Micronesia, Ethiopia, The Netherlands, Italy. , Equatorial Guinea, Monaco, Turkey, Faroe Islands, Brazil, Denmark, Sweden, Philippines, Fiji, Dominica, Iceland, Nauru, Greenland, Liechtenstein, Canada, Germany, Portugal, New Zealand, Zaire, Latvia, Ireland, Spain, Sri Lanka , Guinea-Bissau, Indonesia, Lebanon, Japan, Bahrain, Iraq, Iran, Timor-Leste, Afghanistan, Luxembourg, Bangladesh, Tuvalu, Andorra, Azerbaijan, Jordan, Oman, Venezuela, Mexico, Gibraltar, Poland, South Africa, Turkmenistan, Israel, Greece, Mongolia, Mongolia, Bulgaria, Norway, Singapore, South Korea, North Korea, Baltic States, Thailand, Swaziland, India, Hong Kong, Romania, Zimbabwe, Vatican City, Ukraine, China and Croatia. Then US Federal Reserve Chairman Alan Greenspan said in mid-2005 that "at least, there is little 'foam' (in the US housing market)... it's hard not to see that there are many local bubbles." The Economist magazine, writing at the same time, goes a step further, saying "house price increases worldwide are the biggest bubble in history". In France, economist Jacques Friggit publishes annually a study called "The evolution of prices, values ​​and the number of property sales in France since the 19th century", showing a high price increase since 2001. However, the real estate bubble in France is discussed by economists. Real estate bubbles are always followed by severe price reductions (also known as falling house prices ) which can cause many owners to hold mortgages that exceed their home value. 11.1 million residential properties, or 23.1% of all US homes, were in negative equity as of December 31, 2010. Commercial property values ​​remained at about 35% below their peak in mid-2007 in the UK. As a result, banks are becoming less willing to hold large amounts of property-backed debt, possibly a major problem that affects worldwide recovery in the short term.
In 2006, most of the world's regions were considered to be in the bubble state, although this hypothesis, based on observations of similar patterns in real estate markets from various countries, was subject to controversy. These patterns include excessive assessment and, by extension, excessive borrowings based on excessive assessment.
The US subprime mortgage crisis of 2007-2010, together with its impact and influence on the economy in various countries, implies that this trend may have some common characteristics.
For each country, see:
- Australian property bubble - currently in progress
- Baltic state balloon
- British property bubble
- Bulgarian property bubble
- Chinese property Bubble - 2005-2011
- Danish property bubble - 2001-2006
- The Indian property bubble
- The Irish property bubble - 1999-2006
- Japan asset price bubble - 1986-1991
- Lebanese property bubble
- New Zealand property bubble - currently in progress
- Poland property bubble - 2002-2008
- The Romanian property bubble
- Spanish property bubble - 1985-2008
- United States housing bubble - 1997-2006
US-2012 real estate bubble
Author of The Washington Post Lisa Sturtevant thinks that the housing market in 2013 does not show a housing bubble. "The important difference between the current market and the overheated market in the middle of the last decade is the nature of the mortgage market.The strict underwriting standards have limited the pool of prospective home buyers to those most qualified and most likely able to repay loans. close to market fundamentals, and the recent price growth we experienced was 'real' or 'more real'. "Other recent research shows that middle managers in the finance surveyed did not show awareness of the problem in the housing market as a whole.
Economist David Stockman believes that the second housing bubble begins in 2012 and still heats up in February 2013. Housing inventories began to dwindle as early as 2012 as hedge fund investors and private equity firms bought single-family homes in hopes of renting them while awaiting a housing rebound. Due to QE3 policies, lending rates have been hovering at an all-time low, causing real estate values ​​to rise. House prices rise unreasonably by as much as 25% within a year in metropolitan areas such as the San Francisco Bay Area and Las Vegas.
See also
- Deed instead of foreclosure
- Plantations (land)
- Foreclosure consultant
- Real estate appraisal
- The real estate economy
- Real estate prices
References
Further reading
- John Calverley (2004), Bubble and their way of survival , N. Brealey. ISBNÃ, 1-85788-348-9
- Robert J. Shiller (2005). Irrational Exuberance , ed 2d. Princeton University Press. ISBN Â ± 0-691-12335-7.
- John R. Talbott (2003). Crash Coming in the Housing Market , New York: McGraw-Hill, Inc. ISBN: 0-07-142220-X.
- Andrew Tobias (2005). The Only Investment Guide You Need (ed updated), Harcourt Brace and Company. ISBN: 0-15-602963-4.
- Eric Tyson (2003). Personal Finance for Dummies , fourth edition, Foster City, CA: IDG Books. ISBNÃ, 0-7645-2590-5.
- Burton G. Malkiel (2003). Random Walking Guide to Investing: Ten Rules for Financial Success , New York: W. W. Norton and Company, Inc. ISBNÃ, 0-393-05854-9.
- Elizabeth Warren and Amelia Warren Tyagi (2003). Two Income Traps: Why Mother and Father Middle Class Will Happen , New York: Basic Book. ISBNÃ, 0-465-09082-6.
Source of the article : Wikipedia
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