Housing market dynamics: Any news?

Caterina Mendicino and Sandra Gomes

No 1775, Working Paper Series from European Central Bank

Abstract: This paper explores the link between agent expectations and housing market dynamics. We focus on shifts in the fundamental driving forces of the economy that are anticipated by rational forward-looking agents, i.e. news shocks. Using Bayesian methods and U.S. data, we find that news-shock-driven-cycles account for a sizable fraction of the variability in house prices and other macroeconomic variables over the business cycle and have also contributed to run-ups in house prices over the last three decades. By exploring the link between news shocks and agent expectations, we show that house price growth was positively related to inflation expectations during the boom of the late 1970 JEL Classification: C50, E32, E44

Keywords: bayesian estimation; financial frictions; housing market; local identification; news shocks; survey expectations (search for similar items in EconPapers)
Date: 2015-04
New Economics Papers: this item is included in nep-dge and nep-ure
Note: 1774743
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Related works:
Working Paper: Housing Market Dynamics: Any News? (2012)
Working Paper: Housing Market Dynamics: Any News? (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20151775

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