Working Paper #402
Bubbles in Real Estate Markets
Richard Herring · Susan M. Wachter
Commercial Brokerage Equity Market Investing
Real estate bubbles may occur without banking crises. And banking crises may occur without real estate bubbles. But the two phenomena are correlated in a remarkable number of instances. This paper provides a conceptual framework explaining why the banking sector’s importance and link to the real estate sector not only amplifies the real estate bubble but also can have major implications for the overall stability of the economy.