Previous crises and downturns have shown us that residential real estate markets are an important concern for both financial and macroeconomic stability. This not only holds for my country, where the drop in house prices starting in 2009 severely prolonged the economic downturn. It is probably also true for a country like Lithuania, where 90% of all households are owneroccupiers.
In past decades the total value of residential real estate as a percentage of Gross Domestic Product (GDP) has increased substantially in almost all developed countries. Often this surge in house prices was accompanied by a surge in household debt, which has made economies even more prone to housing shocks. You can see this in figure 1.