Booms and Busts in housing marketss determinantsand implications

This study looks at real estate price booms and busts in industrialised countries. Itidentifies major and persistent deviations from long term trends for 18 countries andestimates the probabilities of their occurrence using a Random Effects Panel Probitmodel over the period 1980-2007. It finds that 1) most recent housing booms havebeen very persistent and of a significant magnitude; 2) there appears to be a strongcorrelation between the persistence and magnitude of booms and subsequent busts; 3)economic costs (in terms of GDP losses during the post-boom phase) dependsignificantly on the magnitude and duration...