Housing Market Expectations

39 Pages Posted: 27 May 2022

See all articles by Theresa Kuchler

Theresa Kuchler

New York University (NYU)

Monika Piazzesi

Stanford University; University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Johannes Stroebel

New York University (NYU); Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: March 2022

Abstract

We review the recent literature on the determinants and effects of housing market expectations. We begin by providing an overview of existing surveys that elicit housing market expectations, and discuss how those surveys may be expanded in the future. We then document a number of facts about time-series and cross-sectional patterns of housing market expectations in these survey data, before summarizing research that has studied how individuals form these expectations. Housing market expectations are strongly influenced by recently observed house price changes, by personally or locally observed house price changes, by house price changes observed in a person's social network, and by current home ownership status. Similarly, experienced house price volatility affects expectations uncertainty. We also summarize recent work that documents how differences in housing market expectations translate into differences in individuals' housing market behaviors, including their home purchasing and mortgage financing decisions. Finally, we highlight research on how expectations affect aggregate outcomes in the housing market.

Keywords: Expectation Formation, Extrapolative Expectations, housing markets, Mortgage Choice, peer effects, Social learning

JEL Classification: D83, G5, R3

Suggested Citation

Kuchler, Theresa and Piazzesi, Monika and Stroebel, Johannes, Housing Market Expectations (March 2022). CEPR Discussion Paper No. DP17158, Available at SSRN: https://ssrn.com/abstract=4121333

Theresa Kuchler (Contact Author)

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
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Monika Piazzesi

Stanford University ( email )

Stanford, CA 94305
United States

University of Chicago - Booth School of Business ( email )

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National Bureau of Economic Research (NBER) ( email )

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Johannes Stroebel

New York University (NYU) ( email )

Bobst Library, E-resource Acquisitions
20 Cooper Square 3rd Floor
New York, NY 10003-711
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

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Cambridge, MA 02138
United States

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