Home Price Bubble
A House Price Bubble is a simple over valuation of the Tradeable Housing Stock.

vs.

Housing Bubble
A Housing Bubble is a simple surplus of actual supply that exceeds actual demand.

​Home Price Bubble
A Home Price Bubble is a simple over valuation of the Tradeable Housing Stock. Home Price Bubbles result from a home trading infrastructure built to allow Owners of Homes to obtain the Highest Price Possible when selling a home they own and for a Trading Commission to be extracted from the home trading process. House Price Bubbles seldom deflate to a point where a Home Price Crash is recorded as the value of the Tradeable Housing Stock seldom drops below its replacement cost. 

Key Takeaways:
1) A Home Price Bubble is not temporary and a simple outcome of the design of the home trading infrastructure.
2) Canada experienced a Home Price Bubble deflation that lasted from Q1 1989 through Q3 2007 and a short one from Q2 2008-Q4 2009
3) House Price Bubbles in smaller markets change more rapidly and frequently than larger markets

Understanding a Home Price Bubble
A Home Price Bubble is perpetual and is continually inflating or deflating as houses trade hands from their current owner to their next when using the services of a commissioned real estate salesperson. Home Price Bubbles are always driven by the encouraging of a Buyer to pay a higher price for a home than what it's appraised value actually is. Since a unique home trades hands so seldom Buyers are easily manipulated into over-bidding for a home because they lack the expertise to appraise homes and are prevented from hiring an appraiser before the bidding process begins.

Many confuse a Home Price Bubble with a Housing Bubble because formal definitions on what is a Housing Bubble and how to measure it has not gained common acceptance in the study of economics. Often you will see prices being referenced in the context of a Housing Bubble when the only metric that should be used is the composition of the housing stock against the composition of households.

What Causes a Home Price Bubble
A Home Price Bubble is caused by the illusion of Home Price Change created from statistics released by co-operative listing services. Seller Beneficial Statistics like Average Selling Price, Median House Price, House Price Indices, Selling to Asking Price and all other statistics originally created to assist home owners in getting the highest price possible for a home during the time it was illegal to assist Buyers in negotiating a lower price.

After one buyer is convinced to over-bid on a home the next home that is listed for sale will be listed a price equal to or exceeding the over-bid amount. This pattern repeats with each successive trade until Buyers are unable to meet the listing price at which time a Home Price Bubble must begin to deflate.

Canada's 1989-2009 Home Price Bubble
 In the spring of 1988 Canada entered a Home Trading Contraction and 11 months later Canada's Home Price Bubble peaked in February 1989 the month when first time buyers had abandoned the home trading market as a result of their inability to qualify for a mortgage. The national trade association for real estate salespeople announced the Statistic called Average Purchase Price had set a new record of $183,900 or an equivalent $394,000 as of August 2022. The trade association was not legally required to explain to Canadians why the Average increased 24.2% year over year that month because so few first time homes were being purchased because it's membership was legally required to get Sellers the Highest Price Possible.

Economists at the Central Bank were prevented from studying sales data because of copyright ownership of the sales data leaving the Central Bank to trust and believe the trade association. It was a common belief within the brokerage community that the Central Bank understood Average Purchase Price was not measuring house prices but only measuring which home was the average home being purchased in a month. It was not until 2010 that the first suspicions that Central Banks believed the Trade Association and that Central Bank Economists did not understand the statistics were simply sales tools to allow a commission to be extracted in a trade of homes. 


Housing Bubble
A Housing Bubble is a simple surplus of actual supply that exceeds actual demand.
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Housing Bubbles have been non-existent in Canada since it became a nation. Countries like China which builds cities of homes that are never occupied have Housing Bubbles. Housing Bubbles are most commonly seen in nations where the average age of population is ageing at too rapid a pace to allow enough new owners to enter the market in enough numbers to satisfy the desire of those seeking to exit it.