Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/192440 
Year of Publication: 
2006
Series/Report no.: 
Discussion Papers No. 458
Publisher: 
Statistics Norway, Research Department, Oslo
Abstract: 
Housing markets tend to display both positive serial correlation as well as a considerable volatility over time. We present a stochastic model illustrating the connection between adaptive expectations and market fluctuations. All macro economic and demographic variables stay fixed over time and price movements are driven by expectations only. In the case where agents face unconstrained mortgage financing, the housing market oscillations are regular and depend on mortgage to income ratios. When credit institutions are introduced, which view houses as mortgage collaterals, the dynamics get complex. Periods of mild oscillations are mixed with violent collapses in an unpredictable manner.
Subjects: 
Heterogeneous agents
adaptive expectation
credit score models
house price cycles
Document Type: 
Working Paper

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