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Equilibrium-Disequilibrium Dynamics of the US Housing Market, 2000-2015: A Quantal Response Statistical Equilibrium Approach

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  • Ozlem Omer

    (Middle East Technical University)

Abstract

In this article, we demonstrate that a quantal response statistical equilibrium approach to the US housing market with the help of maximum entropy method of modeling is a powerful way of revealing different characteristics of the housing market behavior before, during and after the recent housing market crash in the US. In this line, a maximum entropy approach to quantal response statistical equilibrium model (QRSE), introduced by Scharfenaker and Foley (2017), is employed in order to model housing market dynamics in different phases of the most recent housing market cycle using the S&P Case Shiller housing price index for 20 largest- Metropolitan Regions, and Freddie Mac housing price index (FMHPI) for 367 Metropolitan Cities for the US between 2000 and 2015. Estimated model parameters provide an alternative way to understand and explain the behaviors of economic agents, and market dynamics by questioning the traditional economic theory, which takes assumption for the behavior of rational utility maximizing representative agent with self-fulfilled expectations as given.

Suggested Citation

  • Ozlem Omer, 2018. "Equilibrium-Disequilibrium Dynamics of the US Housing Market, 2000-2015: A Quantal Response Statistical Equilibrium Approach," Working Papers 1809, New School for Social Research, Department of Economics.
    • Handle: RePEc:new:wpaper:1809
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    References listed on IDEAS

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    More about this item

    Keywords

    Housing Market Crash; Statistical Equilibrium; Quantal Response; Informational Entropy; Maximum Entropy Method;
    All these keywords.

    JEL classification:

    • C18 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Methodolical Issues: General
    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • D90 - Microeconomics - - Micro-Based Behavioral Economics - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • G01 - Financial Economics - - General - - - Financial Crises
    • R39 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other

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