Heterogeneous expectations, boom-bust housing cycles, and supply conditions: A nonlinear dynamics approach

Arbeitspapier

We combine a standard stock-flow housing market model, incorporating explicit relationships between house prices, the housing stock, and the rent level, with a parsimonious expectation formation scheme of housing market investors, reflecting an evolving mix of extrapolative and regressive expectation rules. The model results in a two-dimensional discrete-time nonlinear dynamical system. Based on realistic parameters, the model is able to generate endogenous boom-bust housing market dynamics with lasting periods of overvaluation and overbuilding. We thus exploit our model to investigate how real forces, in particular supply conditions, interact with expectations-driven housing market fluctuations.

Object Details

• ISBN: 978-3-943153-16-3
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: BERG Working Paper Series ; No. 99

Classification and Topics

• Classification: Wirtschaft ; Expectations; Speculations ; Urban, Rural, Regional, Real Estate, and Transportation Economics: Housing Demand ; Housing Supply and Markets
• Subject: Housing markets ; Speculation ; Housing supply ; Boom-bust cycles ; Nonlinear dynamics

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Dieci, Roberto ; Westerhoff, Frank
• Event: Veröffentlichung
• (who): Bamberg University, Bamberg Economic Research Group (BERG)
• (where): Bamberg
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/110367
• Last update: 10.03.2025, 11:42 AM CET