Housing Price Volatility and Econometrics

Econometric models have produced contradictory results and have failed to provide warning of housing market crashes. The article should illustrate the inability of econometrics to reliably predict the last house price bubble and detect the disequilibrium in the housing markets. The authors will demonstrate on particular situation that two distinct but well specified econometric models can lead to different outcomes. The authors argue that the demand for housing is influenced by social constructs, social norms, ideologies, unrealistic expectations, symbolic patterns, and the actual choice of housing is the outcome of complex social interactions with reference groups. Consequently, it is necessary to analyse the potential instability of social constructs, norms, expectations and the changing character of social interactions to better understand purchasing behaviour and, then, house price volatility.