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House Price Expectations and Housing Choice

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Listed:
  • Mankart, Jochen
  • Ludwig, Alexander
  • Wiederholt, Mirko
  • Quintana, Jorge
  • Vellekoop, Nathanael

Abstract

What is the role of heterogenous house-price expectations for boom-bust cycles in the housing market? We exploit a unique Dutch panel data set on households' house price expectations and their consumption, savings and housing choices for the period 2003-2016. This period was characterized by a pronounced boom-bust cycle in the housing market. Conditioning the sample on household heads who report non-zero house price expectations, we find that expectations closely track realized house prices. We next develop a structural life-cycle model of the Dutch housing market where we distinguish household types according to their house price expectations. We employ a calibrated model variant to test if observed variations in expectations can account for the housing boom-bust cycle. First results show that our model closely matches the observed fluctuations of the rent-to-price ratio in the data but overshoots the size of the housing boom.
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Suggested Citation

  • Mankart, Jochen & Ludwig, Alexander & Wiederholt, Mirko & Quintana, Jorge & Vellekoop, Nathanael, 2019. "House Price Expectations and Housing Choice," Annual Conference 2019 (Leipzig): 30 Years after the Fall of the Berlin Wall - Democracy and Market Economy 203516, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc19:203516
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    References listed on IDEAS

    as
    1. Jack Favilukis & Sydney C. Ludvigson & Stijn Van Nieuwerburgh, 2017. "The Macroeconomic Effects of Housing Wealth, Housing Finance, and Limited Risk Sharing in General Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 125(1), pages 140-223.
    2. Bailey, Michael & D�vila, Eduardo & Kuchler, Theresa & Str�bel, Johannes, 2017. "House Price Beliefs And Mortgage Leverage Choice," CEPR Discussion Papers 12476, C.E.P.R. Discussion Papers.
    3. Aida Caldera Sánchez & Dan Andrews, 2011. "Residential Mobility and Public Policy in OECD Countries," OECD Journal: Economic Studies, OECD Publishing, vol. 2011(1), pages 1-22.
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • D31 - Microeconomics - - Distribution - - - Personal Income and Wealth Distribution
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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