Understanding Booms and Busts in Housing Markets

Craig Burnside, Martin Eichenbaum and Sergio Rebelo (s-rebelo@kellogg.northwestern.edu)

No 16734, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Some booms in housing prices are followed by busts. Others are not. It is generally difficult to find observable fundamentals that are useful for predicting whether a boom will turn into a bust or not. We develop a model consistent with these observations. Agents have heterogeneous expectations about long-run fundamentals but change their views because of “social dynamics.” Agents with tighter priors are more likely to convert others to their beliefs. Boom-bust episodes typically occur when skeptical agents happen to be correct. The booms that are not followed by busts typically occur when optimistic agents happen to be correct.

JEL-codes: E32 R31 (search for similar items in EconPapers)
Date: 2011-01
Note: AP EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (103)

Published as Craig Burnside & Martin Eichenbaum & Sergio Rebelo, 2016. "Understanding Booms and Busts in Housing Markets," Journal of Political Economy, University of Chicago Press, vol. 124(4), pages 000 - 000.

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Related works:
Journal Article: Understanding Booms and Busts in Housing Markets (2016)
Working Paper: Understanding booms and busts in housing markets (2012)
Working Paper: Understanding Booms and Busts in Housing Markets (2012)
Working Paper: Understanding Booms and Busts in Housing Markets (2011)
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