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Home Price Expectations and Spending: Evidence from a Field Experiment

Author

Listed:
  • Felix Chopra
  • Christopher Roth
  • Johannes Wohlfart

Abstract

We conduct a field experiment with US households to study how expectations about long-run home price growth shape spending decisions. We exogenously vary survey respondents' expectations by providing different expert forecasts. Homeowners' spending, measured using rich home-scanner data, is inelastic to home price expectations. By contrast, renters reduce their spending when expecting higher home price growth. These patterns reflect positive wealth effects for owners from higher future wealth and negative income effects for both groups due to higher future housing costs. Our study highlights consequences of asset price growth and long-term expectations about the economy for household behavior.

Suggested Citation

  • Felix Chopra & Christopher Roth & Johannes Wohlfart, 2025. "Home Price Expectations and Spending: Evidence from a Field Experiment," American Economic Review, American Economic Association, vol. 115(7), pages 2267-2305, July.
    • Handle: RePEc:aea:aecrev:v:115:y:2025:i:7:p:2267-2305
    DOI: 10.1257/aer.20240022
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    Cited by:

    1. Botelho Azevedo, Alda & Gonçalves, Inês & Pereira dos Santos, João, 2025. "Can’t Buy Me Home: Beliefs, Facts, and Policy in the Housing Affordability Crisis," IZA Discussion Papers 18073, Institute of Labor Economics (IZA).
    2. Kiesl-Reiter, Sarah, 2024. "Subjective Expectations about Joint Return Distributions," VfS Annual Conference 2024 (Berlin): Upcoming Labor Market Challenges 302423, Verein für Socialpolitik / German Economic Association.
    3. Markus Dertwinkel-Kalt & Max R. P. Grossmann, 2025. "Public Support for Environmental Regulation: When Ideology Trumps Knowledge," Papers 2503.10821, arXiv.org, revised Aug 2025.
    4. Elisa Guglielminetti & Michele Loberto, 2025. "Inflation expectations and price-setting decisions: insights from the housing market," Temi di discussione (Economic working papers) 1507, Bank of Italy, Economic Research and International Relations Area.
    5. Jessica Piccolo & Yuriy Gorodnichenko, "undated". "Homeownership and Attention to Inflation: Evidence from Information Treatments," "Marco Fanno" Working Papers 0317, Dipartimento di Scienze Economiche "Marco Fanno".
    6. Michael Weber & Bernardo Candia & Hassan Afrouzi & Tiziano Ropele & Rodrigo Lluberas & Serafin Frache & Brent Meyer & Saten Kumar & Yuriy Gorodnichenko & Dimitris Georgarakos & Olivier Coibion & Geoff, 2025. "Tell Me Something I Don't Already Know: Learning in Low‐ and High‐Inflation Settings," Econometrica, Econometric Society, vol. 93(1), pages 229-264, January.
    7. Alda Botelho Azevedo & Inês Gonçalves & João Pereira dos Santos, 2025. "Can’t Buy Me Home – Beliefs, Facts, and Policy in the Housing Affordability Crisis," GEE Papers 191, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Jun 2025.
    8. Sarah Kiesl-Reiter & Melanie Lührmann & Jonathan Shaw & Joachim Winter, 2024. "The Formation of Subjective House Price Expectations," Rationality and Competition Discussion Paper Series 491, CRC TRR 190 Rationality and Competition.

    More about this item

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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