What Have They Been Thinking? Homebuyer Behavior in Hot and Cold Markets — A 2014 Update

47 Pages Posted: 20 Mar 2015

See all articles by Karl E. Case

Karl E. Case

Wellesley College

Robert J. Shiller

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

Anne Thompson

McGraw-Hill Construction

Date Written: March 2014

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.

JEL Classification: R30

Suggested Citation

Case, Karl E. and Shiller, Robert J. and Thompson, Anne, What Have They Been Thinking? Homebuyer Behavior in Hot and Cold Markets — A 2014 Update (March 2014). Cowles Foundation Discussion Paper No. 1876R. Available at SSRN: https://ssrn.com/abstract=2580196 or http://dx.doi.org/10.2139/ssrn.2580196

Karl E. Case

Wellesley College ( email )

106 Central Street
Wellesley, MA 02181
United States
617-973-3957 (Phone)
617-283-3639 (Fax)

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

Register to save articles to
your library

Register

Paper statistics

Downloads
190
rank
153,713
Abstract Views
689
PlumX Metrics