Identifying Booms and Busts in House Prices under Heterogeneous Expectations

Arbeitspapier

We introduce heterogeneous expectations in a standard housing market model linking housing rental levels to fundamental buying prices. Using quarterly data we estimate the model parameters for eight different countries, US, UK, NL, JP, CH, ES, SE and BE. We find that the data support heterogeneity in expectations, with temporary endogenous switching between fundamental mean-reverting and trend-following chartists beliefs based on their relative performance. For all countries we identify temporary house price bubbles, amplified by trend extrapolation, and crashes reinforced by fundamentalists. The qualitative predictions of such non-linear models are very different from standard linear benchmarks, with important policy implications. The fundamental price becomes unstable, e.g. when the interest rate is set too low or mortgage tax deductions too high, giving rise to multiple non-fundamental equilibria and/or global instability.

Angaben zum Objekt

• Sprache: Englisch

Verweise und Beziehungen

• Erschienen in: Series: Tinbergen Institute Discussion Paper ; No. 14-157/II

Klassifikation und Themen

• Klassifikation: Wirtschaft ; Forecasting Models; Simulation Methods ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand ; Housing Supply and Markets
• Thema: housing prices ; heterogenous agents model ; bounded rationality ; bubbles

Beteiligte, Orts- und Zeitangaben

• Ereignis: Geistige Schöpfung
• (wer): Bolt, Wilko ; Demertzis, Maria ; Diks, Cees ; Hommes, Cars ; van der Leij, Marco
• Ereignis: Veröffentlichung
• (wer): Tinbergen Institute
• (wo): Amsterdam and Rotterdam
• (wann): 2014

Weitere Informationen

• Handle: http://hdl.handle.net/10419/107869
• Letzte Aktualisierung: 10.03.2025, 11:44 MEZ