Price-Segmented Beliefs and the U.S. Housing Boom

Margaret Jacobson

No 2026-025, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: This paper shows that expected capital gains in several MSAs were higher for relatively lower-priced, rather than higher-priced, houses during the U.S. boom of the 2000s. Because buyers of lower-priced houses tend to be more sensitive to credit conditions than buyers of higher-priced houses, this paper documents patterns that are consistent with an interaction of beliefs and loose credit conditions in a time period where direct evidence on house price beliefs is scarce. Documenting this interaction is important for unifying beliefs and credit conditions as joint, instead of competing, explanations for the U.S. housing boom of the 2000s.

Keywords: real estate market; subprime lending; consumer finance (search for similar items in EconPapers)
JEL-codes: D14 D91 R21 R31 (search for similar items in EconPapers)
Pages: 14 p.
Date: 2026-05-04
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:103195

DOI: 10.17016/FEDS.2026.022

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