The Unassuming Economist

From a new paper by Robert J. Shiller and Anne K. Thompson:

“Questionnaire surveys undertaken in 1988 and annually from 2003 through 2021 of recent homebuyers in each of four U.S. metropolitan areas shed light on their expectations and reasons for purchasing during the housing boom, collapse and recovery. We find that homebuyers were generally well informed, and that their short-run expectations if anything underreacted to the year-to-year change in actual home prices. Housing bubbles can be seen in their long-term (annualized 10-year) home price expectations, the long boom that preceded the 2007-09 crisis was associated with changing public understanding of speculative bubbles. During the early years of this decade-long rebound both short and long-term expectations were out of line with actual changes in prices. Since 2014 long-term expectations have converged with short term expectations and actual price changes and all three series have moved in synch. With the onset of Covid-19, actual and anticipated appreciation diverged once again. Buyers presumed a coming slowdown in the market that has yet to materialize.”

Also see summary of the paper, presentation, and discussion of the paper by Adam Guren and Joseph Gyourko.