Canada’s Housing Market – Are Prices in Bubble Territory?
Interesting new research –
Speculative Fever: Investor Contagion in the
Housing Bubble by Patrick Bayer, Kyle Mangum, & James W. Roberts; NBER
Working Paper No. 22065; Issued in March 2016
Abstract
Historical
anecdotes of new investors being drawn into a booming asset market, only to
suffer when the market turns, abound. While the role of investor contagion in
asset bubbles has been explored extensively in the theoretical literature,
causal empirical evidence on the topic is virtually non-existent. This paper
studies the recent boom and bust in the U.S. housing market, establishing that
many novice investors entered the market as a direct result of observing
investing activity of multiple forms in their own neighborhoods and that these
“infected” investors performed poorly relative to other investors along several
dimensions.
The Economist offers the latest global update:
“GLOBALISATION has
created a handful of metropolises that attract people, capital and ideas from
all over the world, almost irrespective of how their national economy is doing.
House prices in such places, unsurprisingly, outpace the national average. In
our latest round-up of global housing, we find that prices have risen in 20 of
the 26 countries we track over the past year, at an (unweighted) average pace
of 5.1% after adjusting for inflation. Prices in pre-eminent cities in these
countries, however, have risen by 8.3% on average.”