This Selected Issues paper examines the housing market in Israel. Property prices in Israel are currently about 25 percent above their equilibrium value, owing largely to low mortgage interest rates and supply shortages. Price-to-income and price-to-rent ratios are well above their equilibrium value. The risk of a sharp correction in housing prices-although mitigated by the supply shortages-remains a concern and could have important macro-financial implications. To contain such risks, macroprudential policies should be further tightened. At the same time, concerted efforts should be made to alleviate supply-side constraints.