A Rational Explanation for Boom-and-Bust Price Patterns in Real Estate Markets
Author
Start Page / End Page
Volume
Issue Number
Year
Publication
Su Han Chan, Ko Wang, Jing Yang
257 / 282
14
3
2011
International Real Estate Review
Abstract
This paper develops a stylized model to provide a rational explanation for the boom-and-bust price movement pattern that we frequently observe in the real world. Our stylized model indicates that there are three conditions to form a boom-and-bust price pattern in a community: a move-in of high income residents, wide income gap between new and existing residents, and supply process that leads to an inventory buildup. It seems that, based on these three conditions, China is more likely to experience a boom-and-bust price movement pattern than a developed country with a more mature and less vibrant economy.
Keywords
Real Estate Cycles; Boom-and-Bust; Supply Decision; Moving Costs