Expectation-driven cycles in the housing market: Evidence from survey data

Abstract

Using a vector-autoregression (VAR) model and data from the University of Michigan

Countercyclical capital rules for small open economies

“…Therefore, we also explicitly consider the role that expectations for future house prices play in the endogenous accumulation of credit risk. 34 Lambertini et al (2013b) provide empirical evidence for the importance of expectations over house prices for explaining the path of macroeconomic variables during house price booms. By setting a shock that agents in the model expect to occur in the future, we can analyse the response of these agents in anticipation of these future changes.…”

Testing the global banking glut hypothesis

“…Therefore, we include residential investment in order to analyze whether funding flow shocks have an impact on the overall housing market, including the supply side. We order residential investment after consumption and before house prices, assuming that the supply affects fluctuations in prices (see Lambertini et al (2013)). Figure 10 shows that gross flows have no impact on residential investment, while net flows in both banking and securities generate a boom in residential investment, consumption, house prices and mortgage loans, as experienced by the U.S. economy.…”

Expectations During the U.S. Housing Boom: Inferring Beliefs from Actions

“…An important question is how these expectations measures fit the evidence on expectations derived from other sources. In particular, the literature that studies house price cycles draws expectations data from surveys (e.g., Piazzesi and Schneider, 2009;Lambertini et al, 2013;Cox and Ludvigson, 2018). The main source of survey expectations about housing is the Michigan Survey of Consumers, which, to our best knowledge, is the only survey of house price expectations that covers the entire boom period.…”

“…In contrast, surveys estimate average expectations. Most researchers in the field use the Michigan Survey of Consumers (Piazzesi and Schneider, 2009;Lambertini, Mendicino, and Punzi, 2013;Cox and Ludvigson, 2018), and some of the respondents may not participate actively in the market. Conversely, our method measures the expectations of the marginal buyers who actually transacted.…”