IMF Working Papers

Not all Housing Cycles are Created Equal: Macroeconomic Consequences of Housing Booms

By Bruno Albuquerque, Eugenio M Cerutti, Yosuke Kido, Richard Varghese

February 28, 2025

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Bruno Albuquerque, Eugenio M Cerutti, Yosuke Kido, and Richard Varghese. "Not all Housing Cycles are Created Equal: Macroeconomic Consequences of Housing Booms", IMF Working Papers 2025, 050 (2025), accessed March 21, 2025, https://doi.org/10.5089/9798229002042.001

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Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper shows that not all housing price cycles are alike. The nature of the housing expansion phase—especially whether a housing price boom characterized by rapid and persistent house price growth is present—plays a key role in shaping the severity of the subsequent contraction, and the net macroeconomic impact over the full cycle. Analyzing 180 housing expansions across 68 countries, we classify 49 percent as housing booms, characterized by rapid and persistent real house price increases. We find that economic downturns are significantly deeper and longer when housing contractions are preceded by a housing boom. The housing contraction is more severe the more intensive the preceding housing boom, and when accompanied by a credit boom. Overall, while housing booms spur stronger economic growth during the expansion phase, their sharp reversals lead to severe housing contractions, resulting in significant net negative effects on the real economy.

Subject: Business cycles, Consumer credit, Credit booms, Economic growth, Housing, Housing prices, Money, National accounts, Prices

Keywords: Business cycles, Consumer credit, Credit booms, Global, Housing, Housing boom, Housing booms, Housing busts, Housing contraction, Housing expansion, Housing expansion phase, Housing price boom, Housing prices, Macroprudential policies

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