House prices and systemic events over the last six centuries

Our study examines long-term housing market behavior in Stockholm from 1420 to 2021, identifying episodes of overvaluation and quantifying the effects of systemic shocks: specifically, wars and epidemics. Using a stylized three-criteria model based on cycle detection, affordability stress, and abnormal post‑peak corrections, we flag 13 housing cycles marked by affordability strain and identify five episodes that fulfill bubble criteria. To validate these findings, we employ a reduced-form fundamental price model (based on population and real construction costs) and the price-to-rent ratio, which confirm four bubble episodes. Our ARIMAX analysis reveals that house prices decline by 11–17% on average following warfare, with variations depending on conflict type, while epidemics have no significant long-term price impact when isolated from overlapping events. By offering a six-century perspective of house price dynamics and systemic shock resilience, this research provides valuable historical context to contemporary policy discussions on housing stability.