House Price Expectations and Housing Choice

Jochen Mankart, Alexander Ludwig, Mirko Wiederholt, Jorge Quintana and Nathanaël Vellekoop

VfS Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy from Verein für Socialpolitik / German Economic Association

Abstract: What is the role of heterogenous house-price expectations for boom-bust cycles in the housing market? We exploit a unique Dutch panel data set on households' house price expectations and their consumption, savings and housing choices for the period 2003-2016. This period was characterized by a pronounced boom-bust cycle in the housing market. Conditioning the sample on household heads who report non-zero house price expectations, we find that expectations closely track realized house prices. We next develop a structural life-cycle model of the Dutch housing market where we distinguish household types according to their house price expectations. We employ a calibrated model variant to test if observed variations in expectations can account for the housing boom-bust cycle. First results show that our model closely matches the observed fluctuations of the rent-to-price ratio in the data but overshoots the size of the housing boom.

Keywords: Housing; survey expectations; house price cycles; life-cycle model (search for similar items in EconPapers)
JEL-codes: D14 D31 D84 E21 E30 G21 R21 (search for similar items in EconPapers)
Date: 2019
New Economics Papers: this item is included in nep-mac and nep-ure
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Working Paper: House Price Expectations and Housing Choice (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc19:203516

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