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American Economic Review Vol. 115 No. 7 2025

Home Price Expectations and Spending: Evidence from a Field Experiment

Felix Chopra1; Christopher Roth2; Johannes Wohlfart3

1 Frankfurt School of Finance and Management, IZA, CESifo (email: ) · 2 University of Cologne, CEPR, ECONtribute, MPI for Research on Collective Goods Bonn (email: ) · 3 University of Cologne, ECONtribute, MPI for Research on Collective Goods Bonn, CEBI (email: )

Abstract

We conduct a field experiment with US households to study how expectations about long-run home price growth shape spending decisions. We exogenously vary survey respondents' expectations by providing different expert forecasts. Homeowners' spending, measured using rich home-scanner data, is inelastic to home price expectations. By contrast, renters reduce their spending when expecting higher home price growth. These patterns reflect positive wealth effects for owners from higher future wealth and negative income effects for both groups due to higher future housing costs. Our study highlights consequences of asset price growth and long-term expectations about the economy for household behavior.

DOI
10.1257/aer.20240022
Volume
115
Issue
7
Pages
2267-2305
Language
en
Sources
bibtex:phds-export.bib openalex crossref

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