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A Rational Explanation for Boom-and-Bust Price Patterns in Real Estate Markets

Author

Listed:
  • Su Han Chan

    (Department of Real Estate at the Zicklin School of Business, Baruch College/CUNY)

  • Ko Wang

    (Newman Chair in Real Estate Finance, Department of Real Estate at the Zicklin School of Business, Baruch College/CUNY)

  • Jing Yang

    (Department of Finance at the Mihaylo College of Business and Economics, California State University- Fullerton)

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.

Suggested Citation

  • Su Han Chan & Ko Wang & Jing Yang, 2011. "A Rational Explanation for Boom-and-Bust Price Patterns in Real Estate Markets," International Real Estate Review, Global Social Science Institute, vol. 14(3), pages 257-282.
    • Handle: RePEc:ire:issued:v:14:n:03:2011:p:257-282
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    References listed on IDEAS

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    Cited by:

    1. Wichita State University, 2016. "Contagion, Interdependence and Diversification across Regional UK Housing Markets," International Real Estate Review, Global Social Science Institute, vol. 19(3), pages 327-351.

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    More about this item

    Keywords

    Real Estate Cycles; Boom-and-Bust; Supply Decision; Moving Costs;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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