1 Price Bubbles on the Housing Market:

Purpose: The purpose is to clarify the concept of bubble, what it means to explain a bubble and propose a list of bubble indicators. Method: The article is based on a literature review and then uses some philosophical ideas to derive conclusions for the problems studied. Findings: A price bubble should be defined only in relation to the development of prices: A dramatic increase immediately followed by a dramatic fall. The traditional definition in terms of prices not determined by fundamentals is problematic primarily because the concept "fundamentals " is vague. A bubble can never be explained by a single factor, but is the result of a complex of factors. The explanatory factors proposed are used to derive a set of indicators that work as warning signals whether a dramatic increase in prices will be followed by a dramatic fall. The list developed covers e.g. interest costs in relation to household incomes, the elasticity of supply, price expectations and credit conditions. Research limitations/implications: Both the explanatory framework and the list of indicators should be seen as preliminary and the starting point for further development through empirical testing. Practical implications: A developed list of bubble indicators could be useful for a number of actors, e.g. banks and authorities responsible for monitoring financial stability. Originality/value: The contribution is a clearer and more useful concept of bubble, a clearer separation of the question whether bubbles exist and how they should be explained. The proposed list of indicators goes far beyond earlier indicators.