Housing Bubbles with Phase Transitions
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arXiv
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| Format: | Preprint |
| Published: |
2023
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| _version_ | 1866912364869189632 |
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| author | Hirano, Tomohiro Toda, Alexis Akira |
| author_facet | Hirano, Tomohiro Toda, Alexis Akira |
| contents | We analyze how equilibrium housing prices are determined in the process of economic development within an overlapping generations model with perfect housing and rental markets. We characterize the rent growth rate in all equilibria. The economy exhibits a two-stage phase transition: as incomes of home buyers rise, the equilibrium regime changes from fundamental to bubble possibility, where fundamental and bubbly equilibria coexist. With even higher incomes, fundamental equilibria disappear and housing bubbles become a necessity. We also discuss extensions and refinements such as equilibrium uniqueness, multiple savings vehicles, welfare implications, credit- and expectation-driven bubbles, and testable implications of our theory. |
| format | Preprint |
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arxiv_https___arxiv_org_abs_2303_11365 |
| institution | arXiv |
| publishDate | 2023 |
| record_format | arxiv |
| spellingShingle | Housing Bubbles with Phase Transitions Hirano, Tomohiro Toda, Alexis Akira Theoretical Economics We analyze how equilibrium housing prices are determined in the process of economic development within an overlapping generations model with perfect housing and rental markets. We characterize the rent growth rate in all equilibria. The economy exhibits a two-stage phase transition: as incomes of home buyers rise, the equilibrium regime changes from fundamental to bubble possibility, where fundamental and bubbly equilibria coexist. With even higher incomes, fundamental equilibria disappear and housing bubbles become a necessity. We also discuss extensions and refinements such as equilibrium uniqueness, multiple savings vehicles, welfare implications, credit- and expectation-driven bubbles, and testable implications of our theory. |
| title | Housing Bubbles with Phase Transitions |
| topic | Theoretical Economics |
| url | https://arxiv.org/abs/2303.11365 |