NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Sebastian Weber

European Department International Monetary Fund
700 19th Street, NW
Washington DC 20431

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Institutional Affiliation: International Monetary Fund

NBER Working Papers and Publications

March 2019Expectations During the U.S. Housing Boom: Inferring Beliefs from Actions
with Itzhak Ben-David, Pascal Towbin: w25702
We infer the role of price expectations in forming the U.S. housing boom in the early- 2000s from examining housing inventories. We use a reduced form model to show that agents invest in vacant homes when they anticipate prices will increase. Empirically, vacancy can discriminate between price movements related to shocks to demand for housing services (low vacancy) and shocks to expectations (high vacancy). Using a structural vector autoregression with sign restrictions, we show that expectation shocks were a prime factor explaining the boom particularly in the Sand States, which experienced unprecedented booms.
 
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