Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/289821 
Year of Publication: 
2024
Series/Report no.: 
Discussion Paper No. 491
Publisher: 
Ludwig-Maximilians-Universität München und Humboldt-Universität zu Berlin, Collaborative Research Center Transregio 190 - Rationality and Competition, München und Berlin
Abstract: 
Subjective house price expectations drive individual housing choices and market dynamics. We study the formation of subjective expectations about local house prices using novel survey data from Britain, a country with high homeownership rates and widely varying local housing dynamics. There is a substantial and heterogeneous perception gap and individuals extrapolate strongly from perceived but not from realized past price changes. In addition, expectations are predicted by wider, easily observable measures of local economic conditions, especially among individuals with low financial sophistication. Individuals residing in local housing markets where past prices are less informative or less observable rely more strongly on local economic conditions in their belief formation. Our results emphasize the role of heterogeneity in expectations formation processes, and their underlying information set.
Subjects: 
Subjective Expectations
Local Housing Markets
Local Economic Conditions
JEL: 
D12
D84
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.