Equilibrium-Disequilibrium Dynamics of the US Housing Market, 2000-2015: A Quantal Response Statistical Equilibrium Approach

Ozlem Omer ()

No 1809, Working Papers from New School for Social Research, Department of Economics

Abstract: In this article, we demonstrate that a quantal response statistical equilibrium approach to the US housing market with the help of maximum entropy method of modeling is a powerful way of revealing different characteristics of the housing market behavior before, during and after the recent housing market crash in the US. In this line, a maximum entropy approach to quantal response statistical equilibrium model (QRSE), introduced by Scharfenaker and Foley (2017), is employed in order to model housing market dynamics in different phases of the most recent housing market cycle using the S&P Case Shiller housing price index for 20 largest- Metropolitan Regions, and Freddie Mac housing price index (FMHPI) for 367 Metropolitan Cities for the US between 2000 and 2015. Estimated model parameters provide an alternative way to understand and explain the behaviors of economic agents, and market dynamics by questioning the traditional economic theory, which takes assumption for the behavior of rational utility maximizing representative agent with self-fulfilled expectations as given.

Keywords: Housing Market Crash; Statistical Equilibrium; Quantal Response; Informational Entropy; Maximum Entropy Method (search for similar items in EconPapers)
JEL-codes: C18 D89 D90 E30 G01 R39 (search for similar items in EconPapers)
Pages: 33 pages
Date: 2018-08
New Economics Papers: this item is included in nep-hme, nep-mac, nep-upt and nep-ure
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http://www.economicpolicyresearch.org/econ/2018/NSSR_WP_092018.pdf First version, 2018 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:new:wpaper:1809

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