publication . Preprint . 2014

Bubbles, Post-Crash Dynamics, and the Housing Market

Crocker H. Liu; Adam Nowak; Stuart Rosenthal;
Open Access
  • Published: 01 May 2014
Abstract
This paper documents and explains previously unrecognized post-crash dynamics following the collapse of a housing bubble. A simple model predicts that speculative developers ensure stable pre-crash relative prices between small and large homes while their post-crash exit allows small-home relative values to fall. Evidence from Phoenix supports the model. Although home prices doubled 2004-2006, relative prices of small-to-large homes remained nearly constant but then plummeted post-crash. As speculative developers return relative prices must return to pre-boom levels, consistent with patterns since 2011. Anticipated mean reversion indicates that cities can reduce...
Subjects
free text keywords: Housing Bubble, Repeat Sales, Post-Crash Dynamics, jel:G12, jel:G14, jel:R31, jel:R51
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