Heterogeneity in expectations and house price dynamics

Alexander Ludwig, Jochen Mankart, Jorge Quintana and Mirko Wiederholt

No 432, SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE

Abstract: Expectations are central for housing decisions and heterogeneity in expectations is a robust feature of survey data. We study the implications of heterogeneity in house price growth expectations for the level of house prices. We feed the joint empirical distributions of income, wealth and expectations into a calibrated heterogeneous agents housing model. We find that eliminating heterogeneity in house price growth expectations would raise average house prices and amplify house price fluctuations thereby reducing the fit of the model. Without heterogeneity, average house prices would be about 11 percent higher and the boom-bust cycle would be about 41 percent larger.

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: 2024
New Economics Papers: this item is included in nep-dge and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.econstor.eu/bitstream/10419/306360/1/1908127880.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:zbw:safewp:306360

DOI: 10.2139/ssrn.4967237

Access Statistics for this paper

More papers in SAFE Working Paper Series from Leibniz Institute for Financial Research SAFE Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().