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Housing Market Dynamics: Any News?

  • Sandra Gomes
  • Caterina Mendicino

This paper quantifies the role of expectation-driven cycles for housing market fluctuations in the United States. We find that news shocks: (1) account for a sizable fraction of the variability in house prices and other macroeconomic variables over the business cycle and (2) significantly contributed to booms and busts episodes in house prices over the last three decades. By linking news shocks to agents’ expectations, we find that house prices were positively related to inflation expectations during the boom of the late 1970’s while they were negatively related to interest rate expectations during the housing boom that peaked in the mid-2000’s.

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Paper provided by Banco de Portugal, Economics and Research Department in its series Working Papers with number w201121.

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Date of creation: 2011
Handle: RePEc:ptu:wpaper:w201121
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