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What Have They Been Thinking" Home Buyer Behavior in Hot and Cold Markets -- A 2014 Update

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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.

Suggested Citation

  • Karl E. Case & Robert J. Shiller & Anne K. Thompson, 2012. "What Have They Been Thinking" Home Buyer Behavior in Hot and Cold Markets -- A 2014 Update," Cowles Foundation Discussion Papers 1876R, Cowles Foundation for Research in Economics, Yale University, revised Mar 2015.
    • Handle: RePEc:cwl:cwldpp:1876r
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    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d18/d1876-r.pdf
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    References listed on IDEAS

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    Cited by:

    1. Andrea Gazzani, 2020. "News and noise bubbles in the housing market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 36, pages 46-72, April.
    2. Itzhak Ben-David & Pascal Towbin & Sebastian Weber, 2019. "Inferring Expectations from Observables: Evidence from the Housing Market," NBER Working Papers 25702, National Bureau of Economic Research, Inc.
    3. Antonio Gargano & Marco Giacoletti & Elvis Jarnecic, 2023. "Local Experiences, Search, and Spillovers in the Housing Market," Journal of Finance, American Finance Association, vol. 78(2), pages 1015-1053, April.

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    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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