Understanding Recent Trends in House Prices and Home Ownership

Robert Shiller

No 1630, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: This paper looks at a broad array of evidence concerning the recent boom in home prices, and considers what this means for future home prices and the economy. It does not appear possible to explain the boom in terms of fundamentals such as rents or construction costs. A psychological theory, that represents the boom as taking place because of a feedback mechanism or social epidemic that encourages a view of housing as an important investment opportunity, fits the evidence better. Three case studies of past booms are considered for comparison: the US housing boom of 1950, the US farmland boom of the 1970s, and the temporary interruption 2004-5 of the UK housing boom. The paper concludes that while it is possible that prices will continue to go up as is commonly expected, there is a high probability of steady and substantial real home price declines extending over years to come.

Keywords: Home prices; Residential investment; Mortgage; Subprime crisis; Business cycle; Recession; Boom; Bubble; Monetary policy (search for similar items in EconPapers)
JEL-codes: R21 (search for similar items in EconPapers)
Pages: pages
Date: 2007-09, Revised 2007-10
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (198)

Published in Housing, Housing Finance and Monetary Policy, Jackson Hole Conference Series, Federal Reserve Bank of Kansas City, 2008, pp. 85-123

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Journal Article: Understanding recent trends in house prices and homeownership (2007)
Working Paper: Understanding Recent Trends in House Prices and Home Ownership (2007)
Working Paper: Understanding Recent Trends in House Prices and Home Ownership (2007)
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