Article

Journal of Economics and Finance

, Volume 39, Issue 1, pp 136-152

A time series test to identify housing bubbles

  • Diego EscobariAffiliated withDepartment of Economics and Finance, University of Texas – Pan American Email author 
  • , Damian S. DamianovAffiliated withDepartment of Economics and Finance, University of Texas – Pan American
  • , Andres BelloAffiliated withDepartment of Economics and Finance, University of Texas – Pan American

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Abstract

In this paper we propose a new time series empirical test to identify housing bubble periods. Our test estimates the beginning and the burst of bubbles as structural breaks in the difference between the appreciation rates of the Case-Shiller price tiers. We identify the relevant periods by exploiting the common characteristic that lower-tier house prices tend to rise faster during the boom and fall more precipitously during the bust. We implement our test on 15 U.S. Metropolitan Statistical Areas during the most recent housing bubble.

Keywords

Housing bubbles Price tiers Time series

JEL Classification

R31 D11 D12