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Momentum traders in the housing market: survey evidence and a search model

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Listed:
  • Monika Piazzesi
  • Martin Schneider

Abstract

This paper studies household beliefs during the recent US housing boom. To characterize the heterogeneity in households’ views about housing and the economy, we perform a cluster analysis on survey responses at different stages of the boom. The estimation always finds a small cluster of households who believe it is a good time to buy a house because house prices will rise further. The size of this “momentum” cluster doubled towards the end of the boom. We also provide a simple search model of the housing market to show how a small number of optimistic investors can have a large effect on prices without buying a large share of the housing stock. ; This paper is an extension of Monika Piazzesi's and Martin Schneider's work while they were in the Research Department of the Federal Reserve Bank of Minneapolis.

Suggested Citation

  • Monika Piazzesi & Martin Schneider, 2009. "Momentum traders in the housing market: survey evidence and a search model," Staff Report 422, Federal Reserve Bank of Minneapolis.
  • Handle: RePEc:fip:fedmsr:422
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    File URL: http://www.minneapolisfed.org/publications_papers/pub_display.cfm?id=4164
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    References listed on IDEAS

    as
    1. Miller, Edward M, 1977. "Risk, Uncertainty, and Divergence of Opinion," Journal of Finance, American Finance Association, vol. 32(4), pages 1151-1168, September.
    2. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-1292, December.
    3. Krainer, John, 2001. "A Theory of Liquidity in Residential Real Estate Markets," Journal of Urban Economics, Elsevier, vol. 49(1), pages 32-53, January.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Housing ; Inflation (Finance) ; Interest rates;

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • G1 - Financial Economics - - General Financial Markets
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • R2 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • 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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