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

47 Pages Posted: 22 Sep 2012 Last revised: 11 Oct 2021

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 2012

Abstract

Questionnaire surveys undertaken in 1988 and annually from 2003 through 2014 of recent homebuyers in each of four U.S. metropolitan areas shed light on their expectations and reasons for buying during the recent housing boom and subsequent collapse. They also provide insight into 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 housing bubble can be seen in their long-term (10-year) home price expectations, which reached abnormally high levels relative to mortgage rates at the peak of the boom and have 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.

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 2012). Available at SSRN: https://ssrn.com/abstract=2150532

Robert J. Shiller

Yale University - Cowles Foundation ( email )

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

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

National Bureau of Economic Research (NBER) ( email )

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Yale University - International Center for Finance ( email )

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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

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