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Inferring Expectations from Observables: Evidence from the Housing Market

Author

Listed:
  • Itzhak Ben-David

    (The Ohio State University and the National Bureau of Economic Research)

  • Pascal Towbin

    (Swiss National Bank)

  • Sebastian Weber

    (International Monetary Fund)

Abstract

We propose a method to detect shifts in housing price expectations by observing excess capacity. Anticipated future price hikes lead to increased current supply, resulting in temporary vacancies. Using a structural vector autoregression with sign restrictions, we analyze the impact of these expectations on the U.S. housing market. Our findings indicate that price expectation shocks primarily drove the 1996–2006 boom, especially in the Sand States. At the boom's peak, these shocks stemmed from unrealistic growth expectations, which reversed during the bust.

Suggested Citation

  • Itzhak Ben-David & Pascal Towbin & Sebastian Weber, 2026. "Inferring Expectations from Observables: Evidence from the Housing Market," The Review of Economics and Statistics, MIT Press, vol. 108(1), pages 162-178, January.
    • Handle: RePEc:tpr:restat:v:108:y:2026:i:1:p:162-178
    DOI: 10.1162/rest_a_01435
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    Cited by:

    1. is not listed on IDEAS
    2. Calvin He & Gianni La Cava, 2020. "The Distributional Effects of Monetary Policy: Evidence from Local Housing Markets," RBA Research Discussion Papers rdp2020-02, Reserve Bank of Australia.
    3. Theresa Kuchler & Monika Piazzesi & Johannes Stroebel, 2022. "Housing Market Expectations," NBER Working Papers 29909, National Bureau of Economic Research, Inc.

    More about this item

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E71 - Macroeconomics and Monetary Economics - - Macro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on the Macro Economy
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • 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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