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Momentum traders in the housing market: survey evidence and a search model

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  • Monika Piazzesi
  • Martin Schneider

Abstract

This paper studies household beliefs during the recent US housing boom. The first part presents evidence from the Michigan Survey of Consumers. To characterize the heterogeneity in households' views about housing and the economy, we perform a cluster analysis on survey responses at different stages of the boom. The estimation always finds a small cluster of households who believe it is a good time to buy a house because house prices will rise further. The size of this "momentum" cluster doubled towards the end of the boom. The second part of the paper provides a simple search model of the housing market to show how a small number of optimistic investors can have a large effect on prices without buying a large share of the housing stock.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 14669.

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Date of creation: Jan 2009
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Publication status: published as Monika Piazzesi & Martin Schneider, 2009. "Momentum Traders in the Housing Market: Survey Evidence and a Search Model," American Economic Review, American Economic Association, vol. 99(2), pages 406-11, May.
Handle: RePEc:nbr:nberwo:14669

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  1. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-92, December.
  2. Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-68, September.
  3. Krainer, John, 2001. "A Theory of Liquidity in Residential Real Estate Markets," Journal of Urban Economics, Elsevier, vol. 49(1), pages 32-53, January.
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  1. Momentum traders and the housing market bubble
    by Economic Logician in Economic Logic on 2009-02-18 14:44:00
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