The Behavior of Home Buyers in Boom and Post-Boom Markets

42 Pages Posted: 5 Jul 2004 Last revised: 5 Jan 2018

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

Date Written: October 1988

Abstract

A questionnaire survey looked at home buyers in May 1988 in two "boom" cities currently experiencing rapid price increases (Anaheim and San Francisco), a "post-boom" city whose home prices are stable or falling a couple years after rapid price increase (Boston) and a "control" city where home prices had been very stable (Milwaukee). Home buyers in the boom cities had much higher expectations for future price increases, and were more influenced by investment motives. The interpretations that people place on the boom are not usually related to any concrete news event; there are instead oft-repeated cliches about home prices. This suggests that sudden real estate booms have, at least in part, a social, rather than rational or economic, basis. There is evidence for excess demand in boom markets and excess supply in the post-boom market; there appear to be various reasons for this: notions of fairness, intrinsic worth, popular theories about prices, coordination problems, and simple mistakes.

Suggested Citation

Case, Karl E. and Shiller, Robert J., The Behavior of Home Buyers in Boom and Post-Boom Markets (October 1988). NBER Working Paper No. w2748. Available at SSRN: https://ssrn.com/abstract=421767

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)

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