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Home Price Expectations and Spending: Evidence from a Field Experiment

Author

Listed:
  • Felix Chopra

    (University of Copenhagen, CEBI)

  • Christopher Roth

    (University of Cologne, CEPR, ECONtribute, MPI for Collective Goods Bonn, briq)

  • Johannes Wohlfart

    (University of Cologne, ECONtribute, MPI for Collective Goods Bonn, CEBI)

Abstract
We conduct a field experiment with US households to study how expectations about long-run home price growth shape spending decisions. In our survey, we exogenously vary these expectations by providing households with different expert forecasts. Linking the survey data with rich home-scanner data, we document that homeowners’ spending is inelastic to home price expectations. By contrast, renters reduce their spending when expecting higher home price growth. These findings reflect differences in the tendency to be a future net buyer of housing across the two groups. Our study highlights consequences of asset price growth for consumption inequality.

Suggested Citation

  • Felix Chopra & Christopher Roth & Johannes Wohlfart, 2023. "Home Price Expectations and Spending: Evidence from a Field Experiment," ECONtribute Discussion Papers Series 233, University of Bonn and University of Cologne, Germany.
    • Handle: RePEc:ajk:ajkdps:233
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    File URL: https://www.econtribute.de/RePEc/ajk/ajkdps/ECONtribute_233_2023.pdf
    File Function: Second version, 2024
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    References listed on IDEAS

    as
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    Cited by:

    1. Sarah Kiesl-Reiter & Melanie Lührmann & Jonathan Shaw & Joachim Winter, 2024. "The Formation of Subjective House Price Expectations," Rationality and Competition Discussion Paper Series 491, CRC TRR 190 Rationality and Competition.
    2. Weber, Michael & Candia, Bernardo & Ropele, Tiziano & Lluberas, Rodrigo & Frache, Serafin & Meyer, Brent & Kumar, Saten & Gorodnichenko, Yuriy & Georgarakos, Dimitris & Coibion, Olivier & Kenny, Geoff, 2023. "Tell Me Something I don't Already Know: Learning in Low and High-inflation Settings," CEPR Discussion Papers 18299, C.E.P.R. Discussion Papers.

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    More about this item

    Keywords

    Consumption; Home prices; Expectations; Information; Homeowner; Renter;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth

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