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What Have They Been Thinking? Homebuyer Behavior in Hot and Cold Markets

Author

Listed:
  • Karl E. Case

    (Wellesley College)

  • Robert J. Shiller

    (Yale University)

  • Anne K. Thompson

    (McGraw-Hill Construction)

Abstract

Questionnaire surveys we have undertaken in 1988 and annually 2003–2012 of recent homebuyers in each of four U.S. cities shed light on their expectations and reasons for buying and selling during the recent housing boom and subsequent collapse, and on the reasons for the housing crisis that initiated the current financial malaise. We find that homebuyers were generally well informed, and that their short-run expectations if anything underreacted to the year-to-year change in actual home prices. More of the root causes of the bubble can be seen in their long-term, ten-year, home price expectations, which reached abnormal levels relative to the mortgage rate at the peak of the boom and declined sharply since. The downward turning point around 2005 of the long boom that preceded the crisis was associated with changing public understanding of speculative bubbles.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Karl E. Case & Robert J. Shiller & Anne K. Thompson, 2012. "What Have They Been Thinking? Homebuyer Behavior in Hot and Cold Markets," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 43(2 (Fall)), pages 265-315.
  • Handle: RePEc:bin:bpeajo:v:43:y:2012:i:2012-02:p:265-315
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    References listed on IDEAS

    as
    1. Jonathan McCarthy & Richard Peach, 2004. "Are home prices the next "bubble"?," Economic Policy Review, Federal Reserve Bank of New York, issue Dec, pages 1-17.
    2. Brueckner, Jan K., 1981. "A dynamic model of housing production," Journal of Urban Economics, Elsevier, vol. 10(1), pages 1-14, July.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    homebuyers; housing market; mortage rates; bubbles;

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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