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Understanding Recent Trends in House Prices and Home Ownership

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  • Robert Shiller

Abstract

This paper looks at a broad array of evidence concerning the recent boom in home prices, and considers what this means for future home prices and the economy. It does not appear possible to explain the boom in terms of fundamentals such as rents or construction costs. A psychological theory, that represents the boom as taking place because of a feedback mechanism or social epidemic that encourages a view of housing as an important investment opportunity, fits the evidence better. Three case studies of past booms are considered for comparison: the US housing boom of 1950, the US farmland boom of the 1970s, and the temporary interruption 2004-5 of the UK housing boom.

Suggested Citation

  • Robert Shiller, 2007. "Understanding Recent Trends in House Prices and Home Ownership," Yale School of Management Working Papers amz2557, Yale School of Management, revised 01 Nov 2007.
    • Handle: RePEc:ysm:wpaper:amz2557
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    File URL: https://repec.som.yale.edu/icfpub/publications/2557.pdf
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    References listed on IDEAS

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    1. John B. Taylor, 2007. "Housing and monetary policy," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 463-476.
    2. David Genesove & Christopher Mayer, 2001. "Loss Aversion and Seller Behavior: Evidence from the Housing Market," The Quarterly Journal of Economics, Oxford University Press, vol. 116(4), pages 1233-1260.
    3. Robert J. Shiller, 2003. "From Efficient Markets Theory to Behavioral Finance," Journal of Economic Perspectives, American Economic Association, vol. 17(1), pages 83-104, Winter.
    4. Case, Karl E & Shiller, Robert J, 1989. "The Efficiency of the Market for Single-Family Homes," American Economic Review, American Economic Association, vol. 79(1), pages 125-137, March.
    5. Oecd, 2006. "Are House Prices Nearing a Peak?: A Probit Analysis for 17 OECD Countries," OECD Economics Department Working Papers 488, OECD Publishing.
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    Cited by:

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    2. Caraiani, Petre, 2023. "Oil news shocks, inflation expectations and social connectedness," Energy Economics, Elsevier, vol. 127(PB).
    3. Jørgensen, Peter Lihn, 2023. "The global savings glut and the housing boom," Journal of Economic Dynamics and Control, Elsevier, vol. 146(C).
    4. Popov, Alexander, 2022. "The division of spoils in a booming industry," Journal of Economic Behavior & Organization, Elsevier, vol. 198(C), pages 341-369.

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