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Learning about Housing Cost: Survey Evidence from the German House Price Boom

Author

Listed:
  • Fabian Kindermann
  • Julia Le Blanc
  • Monika Piazzesi
  • Martin Schneider

Abstract

This paper uses new household survey data to study expectation formation during the recent housing boom in Germany. The cross section of forecasts depends on only two household characteristics: location and tenure. The average household in a region responds to local conditions but underpredicts local price growth. Renters make on average higher and hence more accurate forecasts than owners, although their forecasts are more dispersed and their mean squared forecast errors are higher. A quantitative model of learning about housing cost can match these facts. It emphasizes the unique information structure of housing among asset markets: renters who do not own the asset are relatively well informed about its cash flow, since they pay for housing services that owners simply consume. Renters then make more accurate forecasts in a boom driven by an increase in rents and recovery from a financial crisis.

Suggested Citation

  • Fabian Kindermann & Julia Le Blanc & Monika Piazzesi & Martin Schneider, 2021. "Learning about Housing Cost: Survey Evidence from the German House Price Boom," NBER Working Papers 28895, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:28895
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    1. The ECB's New Strategy: Codifying Existing Practice . . . plus
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2021-08-16 11:00:01

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    Cited by:

    1. Francesco D’Acunto & Daniel Hoang & Michael Weber, 2020. "Managing Households' Expectations with Unconventional Policies," NBER Working Papers 27399, National Bureau of Economic Research, Inc.
    2. Francesco Capozza & Ingar Haaland & Christopher Roth & Johannes Wohlfart, 2021. "Studying Information Acquisition in the Field: A Practical Guide and Review," CEBI working paper series 21-15, University of Copenhagen. Department of Economics. The Center for Economic Behavior and Inequality (CEBI).
    3. Cosmin L. Ilut & Martin Schneider, 2022. "Modeling Uncertainty as Ambiguity: a Review," NBER Working Papers 29915, National Bureau of Economic Research, Inc.
    4. Niklas Gohl & Peter Haan & Claus Michelsen & Felix Weinhardt, 2022. "House Price Expectations," Discussion Papers of DIW Berlin 1994, DIW Berlin, German Institute for Economic Research.
    5. Beutel, Johannes & Metiu, Norbert & Stockerl, Valentin, 2021. "Toothless tiger with claws? Financial stability communication, expectations, and risk-taking," Journal of Monetary Economics, Elsevier, vol. 120(C), pages 53-69.
    6. Gohl, Niklas & Haan, Peter & Michelsen, Claus & Weinhardt, Felix, 2022. "House Price Expectations," IZA Discussion Papers 15040, Institute of Labor Economics (IZA).
    7. Francesco Capozza & Ingar K. Haaland & Christopher Roth & Johannes Wohlfart, 2022. "Recent Advances in Studies of News Consumption," CESifo Working Paper Series 10021, CESifo.
    8. Charles Ka Yui Leung & (single author only), 2021. "Handbook of Real Estate and Macroeconomics: An Introduction," ISER Discussion Paper 1137, Institute of Social and Economic Research, Osaka University.
    9. Francesco Capozza & Ingar Haaland & Christopher Roth & Johannes Wohlfart, 2022. "Recent Advances in Studies of News Consumption," ECONtribute Discussion Papers Series 204, University of Bonn and University of Cologne, Germany.

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    More about this item

    JEL classification:

    • E0 - Macroeconomics and Monetary Economics - - General
    • G0 - Financial Economics - - General
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

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