Bubbling Up? What Consumer Expectations Reveal About U.S. Housing Market Exuberance

We investigate the presence of speculative bubbles in the U.S. housing market after the global financial crisis. Unlike standard approaches that rely on observed economic fundamentals, our method leverages subjective price expectations from the University of Michigan Survey of Consumers to test for exuberance without imposing a specific model of intrinsic housing values. By applying recursive least-squares and quantile-based unit root tests to cumulative expectational errors, we uncover novel evidence of speculative dynamics at the aggregate level and across broad demographic and socioeconomic groups. A date-stamping exercise reveals widespread exuberance in the second half of the 2010s, which paused before the pandemic recession and resurfaced amid the subsequent housing boom in 2021. For the Covid-19 period, we document notable differences in the timing of exuberance between observed house prices and survey-based indicators—a finding that underscores the importance of controlling for fundamentals when identifying speculative behavior. A complementary analysis using the New York Fed’s Survey of Consumer Expectations corroborates the baseline results. Overall, our findings highlight the value of survey data for monitoring housing markets.