The Behavior of Home Buyers in Boom and Post-Boom Markets

Karl Case and Robert Shiller

No 2748, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: A questionnaire survey looked at home buyers in May 1988 in two "boom" cities currently experiencing rapid price increases (Anaheim and San Francisco), a "post-boom" city whose home prices are stable or falling a couple years after rapid price increase (Boston) and a "control" city where home prices had been very stable (Milwaukee). Home buyers in the boom cities had much higher expectations for future price increases, and were more influenced by investment motives. The interpretations that people place on the boom are not usually related to any concrete news event; there are instead oft-repeated cliches about home prices. This suggests that sudden real estate booms have, at least in part, a social, rather than rational or economic, basis. There is evidence for excess demand in boom markets and excess supply in the post-boom market; there appear to be various reasons for this: notions of fairness, intrinsic worth, popular theories about prices, coordination problems, and simple mistakes.

Date: 1988-10
Note: ME
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Citations: View citations in EconPapers (129)

Published as New England Economic Review, pp. 29-46, (November/December 1988).

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Related works:
Journal Article: The behavior of home buyers in boom and post-boom markets (1988)
Working Paper: The Behavior of Home Buyers in Boom and Post-Boom Markets (1988)
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