The Formation of Subjective House Price Expectations

Sarah Kiesl-Reiter, Melanie Lührmann, Jonathan Shaw and Joachim Winter
Additional contact information
Sarah Kiesl-Reiter: ifo Institute
Jonathan Shaw: Institute for Fiscal Studies, London
Joachim Winter: LMU Munich

No 491, Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition

Abstract: Subjective house price expectations drive individual housing choices and market dynamics. We study the formation of subjective expectations about local house prices using novel survey data from Britain, a country with high homeownership rates and widely varying local housing dynamics. There is a substantial and heterogeneous perception gap and individuals extrapolate strongly from perceived but not from realized past price changes. In addition, expectations are predicted by wider, easily observable measures of local economic conditions, especially among individuals with low financial sophistication. Individuals residing in local housing markets where past prices are less informative or less observable rely more strongly on local economic conditions in their belief formation. Our results emphasize the role of heterogeneity in expectations formation processes, and their underlying information set.

Keywords: subjective expectations; housing markets; local economic conditions (search for similar items in EconPapers)
JEL-codes: D12 D84 (search for similar items in EconPapers)
Date: 2024-01-19
New Economics Papers: this item is included in nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://rationality-and-competition.de/wp-content/ ... ussion_paper/491.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:rco:dpaper:491

Access Statistics for this paper

More papers in Rationality and Competition Discussion Paper Series from CRC TRR 190 Rationality and Competition
Bibliographic data for series maintained by Viviana Lalli ().