Bubble-like housing boom–bust cycles: Evidence from the predictive power of households’ expectationsMeiChi Huang The Quarterly Review of Economics and Finance, 2014, vol. 54, issue 1, 2-16 Abstract: This study examines the role of households’ expectations in predicting the housing boom–bust cycles in the United States. It incorporates two nonlinear features of housing price dynamics: a threshold co-movement between households’ expectations and housing price growth and a structural break in their interrelation. It uses the monthly good-time-to-buy (GTTB) index as a proxy for households’ expectations about the U.S. housing market, and employs the structural break threshold vector autoregression (SBTVAR) to specify breakpoints in housing market dynamics during the recent decades. The findings indicate that shifts in interactions between households’ expectations and housing price growth are synchronous with the recent housing boom–bust cycles. The SBTVAR framework outperforms other models as it captures more of the housing market's unique dynamic characteristics. The GTTB index, which governs expectation regime-switching patterns, is able to signal the recent housing bust three periods in advance. Keywords: Housing boom–bust cycles; Households’ expectations; Structural break threshold vector autoregression (SBTVAR); Good-time-to-buy (GTTB) index (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:quaeco:v:54:y:2014:i:1:p:2-16 DOI: 10.1016/j.qref.2013.10.007 Access Statistics for this article The Quarterly Review of Economics and Finance is currently edited by R. J. Arnould and J. E. Finnerty More articles in The Quarterly Review of Economics and Finance from Elsevier |
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