Speaking of yesterday's post about the Riksbank and the housing bubble, one might wonder how you actually define a housing bubble. Wikipedia has the following definition of Real estate price bubble. pacific customs A property price bubble is a type of financial crisis caused by speculation in the price of houses, buildings and condominiums. It is characterized pacific customs by a large, but limited time, upward deviation in the price of single-family homes and condominiums compared to the Consumer Price Index. Wikipedia in English writes this instead (my translation). It is characterized by rapid increases in valuations of real property such as housing until they reach unsustainable levels relative to incomes and other economic factors, followed by a decrease in price levels. These two definitions are pretty good I think, especially the last one. They'll do for me. What many people forget in this context is that the housing bubble really is basically a credit bubble. Without increasing household loans (mortgages), there would have been no price bubble in Sweden. Therefore, it is as I see it more important to have a good definition of the credit bubble. Here is an attempt at definition. A credit bubble occurs when the amount of credits to a certain sector of society (eg households) increases so much that the sector in the long run can no longer pay interest and principal on debt. The cause of the credit bubble is that credit supply conditions are overlapped in one or more ways, such as extremely low interest rates, grace or low demands on cash contribution. When credit conditions tightened since bursting credit bubble. Feel free to come up with better suggestions!
A bubble is just a bubble if it bursts. How else to prove the thesis that there is a bubble? There are important differences in Sweden compared with the bubble in the U.S., in Sweden buys no 3-4 condominiums / villas and rent out the other hand. People are buying primarily for living and loan itself is no reason to scream bubble. For example, I have loan of 1.8m, 2.2m and condominium worth 1.4m on avanza depot. pacific customs Am I in debt or am I free? Can I get more return than the bank rate so it goes without saying that I take out loans to manage my capital optimally. Reply Delete
I miss component of overvaluation in the definitions you mentioned. That's at least what I instinctively think of when I hear begrepper bubble, that someone is paying more for something than they really are worth, because of speculation that it will be worth more in the future. It feels like a component that has been prominent in the events previously classified as bubbles such as real estate pacific customs crisis in the 1990s, the dotcom bubble and the tulip bubble in the Netherlands. Reply Delete
Personally, I like the Swedish definition better. For me, a bubble when something is bought on speculation. The absolute majority in Sweden, buying homes to live in. Therefore, I believe that we do not have a housing bubble in Sweden. However, we have an over-valuation of homes in many omåden. Incidentally, very good that you are trying to define the term. Think it's too many bloggers who scream bubble without telling you what they actually mean by it while the idiot explains all who disagree with ... Reply Delete
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