Bubble-like housing boom–bust cycles: Evidence from the predictive power of households’ expectations

Time‐varying impacts of expectations on housing markets across hot and cold phases

“…Following the pioneering studies on asset bubbles by Shiller (2005, 2008), a number of real‐estate literature greatly supports the pivotal role of people's expectations in real‐estate markets. The incomplete list includes Abildgren et al (2018), Burnside et al (2016), Chang et al (2016), Clayton et al (2009), Dieci and Westerhoff (2016), Freybote and Seagraves (2017), Fuster and Zafar (2016), Goetzmann et al (2012), Huang (2013, 2014), Kashiwagi (2014), Lambertini et al (2017), Ling et al (2014), McCarthy and McQuinn (2017), Piazzesi and Schneider (2009), Simsek (2013), Tomura (2013), Zhang (2016), and Zhu et al (2014), among many others. For instance, Burnside et al (2016), Dieci and Westerhoff (2016), Freybote and Seagraves (2017), Kashiwagi (2014), and Piazzesi and Schneider (2009) all put emphasis on the important role of heterogeneous expectations (belief disagreements) in driving housing‐market dynamics.…”

“…Moreover, the GTTB index is often chosen to proxy for people's expectations by real‐estate studies. Theoretical work includes Ackert et al (2011), Hayunga and Lung (2011), Kiefer (2011), Moench and Ng (2011), Piazzesi and Schneider (2009), and Sommervoll et al (2010); some examples of empirical studies are Davis and Palumbo (2008), Devaney (2012), Glaeser et al (2008), Goetzmann et al (2012), and Huang (2014), among others. For instance, Croce and Haurin (2009) propose that the GTTB index outperforms other predictors in forecasting housing dynamics.…”

“…Dua (2008) adopts the GTTB index in the Granger‐causality analysis regarding consumer house‐buying attitudes and macroeconomic variables. Huang (2014) employs the GTTB index to specify breakpoints in housing‐market dynamics during 1978–2010 under a structural break TAR model. The abovementioned real‐estate literature motivates our selection of the GTTB index to proxy for people's expectations.…”

Do factors influencing consumer home-buying attitudes explain output growth?

“…She shows that prominence is strongest in housing attitudes, increases with income, education and homeownership, and declined during the Great Recession. Huang (2014) utilizes the MSC data on "it is a good time to buy a house" along with housing price growth to show that shifts in the interactions between these two series are synchronous with the recent US housing boom-bust cycles. The study by Croce and Haurin (2009) further shows that the MSC data on "it is a good time to buy a house" are more informative than other housing market indexes in predicting home permits, housing starts and new home sales.…”

“…The studies in the second group utilize consumer survey data that are directly related to home-buying attitudes. For instance, Piazzesi and Schneider (2009), Lambertini et al (2013) and Huang (2014) utilize the MSC data on "it is a good time to buy a house" as a measure of consumers' optimism about future house price appreciation, and then show its importance not only in predicting house prices but also in predicting other macroeconomic variables. Using the MSC data, Lambertini et al (2017) focus on news heard of recent changes in both business conditions and buying conditions for houses.…”