The Housing Boom And Bubble: A Partial Equilibrium Explained

The real estate market has developed quickly in the recent years. It not only satisfies the demand of the consumer, but also promotes the economic growth. Although the real estate market has made some success, there still exist many problems. First, the growth rate of the housing price is much larger than the growth of GDP. Second, many houses which are built in current period are left unused. Some people think that there exists a bubble in the real estate market,and they analyzed the real estate market. Their researches are proximately right and their policy suggestions are very useful. But there are still many defaults in their papers. The most important is that their papers lack the mathematical model. They just describe the real estate market. In order to remedy their defaults, we want to use the local equilibrium to analyze the real estate market. But in this paper, we don't want to judge whether there is a bubble or the extent of the bubble. We just hope to construct a model to analyze the price determine process and explain why the bubble emerges.In this paper, we use the local equilibrium model, since we think that there are some advantages to do so. First, it is not suitable to use the general equilibrium model, since the real estate market is just a small proportion of the whole economy. Second, the local equilibrium is convenient to catch the important characters of the real estate market. At the same time, we assume that the firms, consumers, speculators, banks and government are rational, and the real estate market is completely competing market. We use these assumptions, since we think that they reflect the main characters of the real estate market, so the same results should be obtained in other circumstance.In this paper, we think that the durable property of the housing is the main character of the real estate market, and it is the main reason of the existences of the bubble and the housing leaving unused phenomenon. In this assumption, we analyze its influences to firms, consumers, speculators, banks and government in a united model.In this paper, we analyze the quantity and price of real estate market under the conditions of perfect competition and complete financial market, and under the conditions of speculators, government intervention and incomplete financial market. We find that, in a perfect competition real estate market, complete financial market will...