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Expectations During the U.S. Housing Boom: Inferring Beliefs from Actions

Itzhak Ben-David, Pascal Towbin and Sebastian Weber ()

No 25702, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We infer the role of price expectations in forming the U.S. housing boom in the early- 2000s from examining housing inventories. We use a reduced form model to show that agents invest in vacant homes when they anticipate prices will increase. Empirically, vacancy can discriminate between price movements related to shocks to demand for housing services (low vacancy) and shocks to expectations (high vacancy). Using a structural vector autoregression with sign restrictions, we show that expectation shocks were a prime factor explaining the boom particularly in the Sand States, which experienced unprecedented booms.

JEL-codes: E32 E71 G12 R31 (search for similar items in EconPapers)
Date: 2019-03
New Economics Papers: this item is included in nep-mac and nep-ure
Note: AP CF EFG
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