Earlier Intervention Policy is Best for Housing Boom/Bust Cycles

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.


…(read more)

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