Earlier Intervention Policy is Best for Housing Boom/Bust Cycles

By Jann Swanson

Posted To: MND NewsWire

After looking at housing booms and busts in 20 countries, three economists have concluded that the likelihood of a boom ended in a housing market cycle depends on its age – that is that the longer the cycle continues, the probability that it will end increases (positive duration dependence). They did not find the same was true of housing busts. The three, Luca Agnello of the University of Palermo, Vitor Castro, University of Coimbra (Portugal), and Ricardo M.Sousa University of Minho, (Portugal) and London School of Economic, were prompted to do their study by the prolonged housing bubble following the dot-com bust in the early 2000s followed by the recent housing crisis. Their article, Booms, Busts, and Normal Times in the Housing Market , notes that against the background of the subprime…(read more)

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