Betting on the House: Subjective Expectations and Market Choices

Nicolas Bottan and Ricardo Perez-Truglia

American Economic Journal: Applied Economics, 2025, vol. 17, issue 1, 459-500

Abstract: Home price expectations play a central role in macroeconomics and finance. However, there is little direct evidence on their effect on market choices. We provide causal evidence using a large-scale, high-stakes field experiment in the United States. We sent letters about home price trends to 57,910 homeowners who listed their homes. These letters contained randomized information creating nondeceptive, exogenous variation in home price expectations. Consistent with economic theory, higher expectations reduced selling probability. Behavior was highly elastic: a 1 percentage point increase in expectations caused a 2.63 percentage point reduction in the probability of selling the property within 12 weeks.

JEL-codes: C93 D83 D84 R31 (search for similar items in EconPapers)
Date: 2025
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Working Paper: Betting on the House: Subjective Expectations and Market Choices (2020)
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DOI: 10.1257/app.20230641

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