Israel's housing bubble
Encyclopedia
The Israeli housing bubble is an observation that Israel
i real estate
prices in the late 2000s and 2010 appear to be inflated (when compared to the long-term average, when compared to many other developed economies, when compared to rents and when compared to average income), and that this may constitute a real estate bubble
. On the other hand, it is widely viewed to be caused by a general housing shortage, and many economists and investor
s in Israel do not believe that there is a bubble.
In response to the global economic recession in 2008, Israel's central bank governor, Stanley Fischer
, lowered interest rate
s to an all-time low of 0.5%. That resulted in prices rising very fast in 2009, after rising steadily in the last decade.
Most mortgages in Israel that were taken in the years 2007–2009 were adjustable-rate mortgages that are pegged to the prime rate
which at the low was 1.75%. Many economist
s claim that the rise in price is an economic bubble
and that once interest rates pick up the housing market will crash.
Some also blame Stanley Fisher for repeating Alan Greenspan
's mistakes during the year preceding the housing bubble in the United States
,
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
i real estate
Real estate
In general use, esp. North American, 'real estate' is taken to mean "Property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this; an item of real property; buildings or...
prices in the late 2000s and 2010 appear to be inflated (when compared to the long-term average, when compared to many other developed economies, when compared to rents and when compared to average income), and that this may constitute a real estate bubble
Real estate bubble
A real estate bubble or property bubble is a type of economic bubble that occurs periodically in local or global real estate markets...
. On the other hand, it is widely viewed to be caused by a general housing shortage, and many economists and investor
Investor
An investor is a party that makes an investment into one or more categories of assets --- equity, debt securities, real estate, currency, commodity, derivatives such as put and call options, etc...
s in Israel do not believe that there is a bubble.
In response to the global economic recession in 2008, Israel's central bank governor, Stanley Fischer
Stanley Fischer
Stanley "Stan" Fischer is an American-Israeli economist and the current Governor of the Bank of Israel. He previously served as Chief Economist at the World Bank.-Biography:...
, lowered interest rate
Interest rate
An interest rate is the rate at which interest is paid by a borrower for the use of money that they borrow from a lender. For example, a small company borrows capital from a bank to buy new assets for their business, and in return the lender receives interest at a predetermined interest rate for...
s to an all-time low of 0.5%. That resulted in prices rising very fast in 2009, after rising steadily in the last decade.
Most mortgages in Israel that were taken in the years 2007–2009 were adjustable-rate mortgages that are pegged to the prime rate
Prime rate
Prime rate or prime lending rate is a term applied in many countries to a reference interest rate used by banks. The term originally indicated the rate of interest at which banks lent to favored customers, i.e., those with high credibility, though this is no longer always the case...
which at the low was 1.75%. Many economist
Economist
An economist is a professional in the social science discipline of economics. The individual may also study, develop, and apply theories and concepts from economics and write about economic policy...
s claim that the rise in price is an economic bubble
Economic bubble
An economic bubble is "trade in high volumes at prices that are considerably at variance with intrinsic values"...
and that once interest rates pick up the housing market will crash.
Some also blame Stanley Fisher for repeating Alan Greenspan
Alan Greenspan
Alan Greenspan is an American economist who served as Chairman of the Federal Reserve of the United States from 1987 to 2006. He currently works as a private advisor and provides consulting for firms through his company, Greenspan Associates LLC...
's mistakes during the year preceding the housing bubble in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
,