What Have They Been Thinking? Home Buyer Behavior in Hot and Cold Markets

Yale International Center for Finance Working Paper No. 12-28

41 Pages Posted: 18 Sep 2012

See all articles by Karl E. Case

Karl E. Case

Deceased

Robert J. Shiller

Yale University - Cowles Foundation; National Bureau of Economic Research (NBER); Yale University - International Center for Finance

Anne Thompson

McGraw-Hill Construction

Multiple version iconThere are 3 versions of this paper

Date Written: September 18, 2012

Abstract

Questionnaire surveys we have undertaken in 1988 and annually 2003-2012 of recent homebuyers in each of four U.S. cities shed light on their expectations and reasons for buying and selling during the recent housing boom and subsequent collapse, and on the reasons for the housing crisis that initiated the current financial malaise. We find that homebuyers were generally well informed, and that their short-run expectations if anything underreacted to the year-to-year change in actual home prices. More of the root causes of the bubble can be seen in their long-term, ten-year, home price expectations, which reached abnormal levels relative to the mortgage rate at the peak of the boom and declined sharply since. The downward turning point around 2005 of the long boom that preceded the crisis was associated with changing public understanding of speculative bubbles.

JEL Classification: R30

Suggested Citation

Case, Karl E. and Shiller, Robert J. and Thompson, Anne, What Have They Been Thinking? Home Buyer Behavior in Hot and Cold Markets (September 18, 2012). Yale International Center for Finance Working Paper No. 12-28, Available at SSRN: https://ssrn.com/abstract=2148656 or http://dx.doi.org/10.2139/ssrn.2148656

Karl E. Case

Deceased

Robert J. Shiller (Contact Author)

Yale University - Cowles Foundation ( email )

Box 208281
New Haven, CT 06520-8281
United States
203-432-3708 (Phone)
203-432-6167 (Fax)

HOME PAGE: http://www.econ.yale.edu/~shiller/

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States
203-432-3708 (Phone)

Yale University - International Center for Finance ( email )

Box 208200
New Haven, CT 06520
United States
203-432-3708 (Phone)
203-432-6167 (Fax)

Anne Thompson

McGraw-Hill Construction ( email )

34 Crosby Drive
Bedford, MA 01730
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
24
Abstract Views
651
PlumX Metrics