Dr. Kehr-

You should probably check out Robert Shiller's "Irrational Exuberance". When it first came out in 2005, he had a model that transposed some of the projected "logical" gains in real estate that should have occurred given certain fundamentals. His modeling of both those fundamentals and the actual gains in the US RE market showed two trend lines that did not move in tandem with each other, especially from about 1997-2004. Of course, after the bubble market was exposed and the housing industry came crashing back down to Earth in late 2006, Shiller had gained even more credibility than he had already as the voice of "bubble markets". He has updated the book since then, but I am sure it is worth your looking into and is actually an easy read. By the way, Shiller's work on bubble markets helped propel him to the Nobel Prize in Economics last year.

You can also take look at Robert Shiller's lectures. You can find them on ITunes University.

There are a number of factors that make real estate susceptible to bubbles, including the inelasticity of supply, the absence of short selling so that pessimists about future price trends find it difficult to have an influence on the price, heterogeneous beliefs amongst market traders, and a financing system that leaves the upside risk with the borrower and the downside risk with the lender. Robert Shiller puts forward plausible reasons to explain the behavioural basis of bubbles. The fundamental problem in identifying bubbles is how to define them. The notion that bubbles exist when there is a departure from the fundamental value of assets presumes that a fundamental value can be identified. The fundamental values used often seem to rely on the existence of long run relationships between prices and incomes. This does raise uncomfortable questions such as if the house-building rate fails to keep pace with growing population or households, can one really say that the rise in house prices constitute a bubble? Long term interest rates of low risk securities (eg long dated bonds issued by low risk governments) are not stable but show periodic shifts over time. There is also the risk that observers may label something as being a bubble when they have failed to identify a change in fundamentals. There is a revisionist school on bubbles (eg Lind) which argues that the definition of bubbles should not embody a cause, like irrational beliefs. The problem is that one is left with a phenomenon that can only be observed retrospectively - yes there was a rapid rise in prices followed by a rapid fall. Clearly this is not helpful for prediction. Other revisionists like Garber have suggested that some of the more famous examples of past bubbles are capable of being explained away when the fundamentals are re-evaluated. So what we are left with is good reasons for believing that real estate is susceptible to bubbles without a clear method for identifying when one is underway.

Uh, the price-rent ratio. Why do people dance around that fact? And the percentage of owners goes up.

https://www.thelocal.de/20160928/munich-at-high-risk-of-housing-bubble-report

https://www.visualcapitalist.com/biggest-real-estate-bubbles-2018/

https://www.toytowngermany.com/forum/topic/342921-bavaria-and-the-real-estate-bubble/

In the case of Munich metropolitan region, overpricing is the signal, with respect to the real income (wages) by highly skilled labor. Once the 'Bavarian miracle' is cyclically over, prices will be adjusted reasonably, but not hit the full bottom, like in 'old post-industrial settings', where great pools of poverty prevail, since decades.

A longer cyclical view is presented by Prof. Földvary:

http://www.foldvary.net/works/dep08.pdf

The real estate bubble or housing bubble occurs when real estate prices increase steadily due to increased demand and speculations.

The real estate bubble usually starts when property demand increases, if the offer is limited when demand increases, it usually takes some time for the offer to meet this demand.

Then speculators enter and speculations begin in the real estate market at this time, increasing the demand for a larger proportion.

The situation in the market is now that demand and supply are increasing, this may sound good, but at some point demand is lower or stabilized while supply continues to increase continuously, causing a sudden and sharp decline in prices and a bursting real estate bubble.

According to its definition, the real estate bubble always explodes, if it does not explode it has never been a bubble!

 Bubbles always explode, hence the name!

Unfortunately, the discovery of a real estate bubble is often a difficult challenge until the bubble bursts. This is always the moment when the increasing supply of real estate in the market collides with a halt or lack of demand.

Sometimes prices reach a stage where people can not buy then demand stops, prices fall suddenly and the bubble bursts!