Patterns of speculation in real estate and stocks

Today there is a hot debate in most developed countries regarding the future of real estate markets. Some economists claim that demand is strong and will remain so, others contend that there may be a small correction in the two next years but, surprisingly, few researchers have tried to take a close look at former price peaks to better understand what may be in store. This is the task we undertake in this paper. The present study shows that stock and property price peaks are ruled by similar mechanisms; moreover in both markets the price earnings ratio constitutes a reliable indicator for assessing the level of speculative fever. The paper closes with a prediction about housing prices in San Francisco over the next four years.