Housing Booms and Busts: Convergence and Divergence in OECD Countries

This paper explores the long run relationship between homeownership rates, expenditure shares for housing services and house price fluctuations across countries. First, I provide a comprehensive empirical characterization of housing cycles using a large database covering 18 OECD countries over the period 1970:1-2013:4. Second, the interactions between homeownership, expenditure shares for housing services, real estate specific credit variables and house price fluctuations are investigated. Four novel empirical regularities are identified across countries: homeownership rates are (1) highly negatively correlated with the expenditure shares for housing services, highly positively correlated with (2) the frequency and (3) the intensity, but mainly uncorrelated with (4) the amplitude of independent housing booms and boom-bust cycles. By contrast, LTV and Mortgage-to-GDP ratios cannot explain cross-country differences in the frequency and intensity of independent housing booms and boombust cycles.