Inferring Expectations from Observables: Evidence from the Housing Market

Itzhak Ben-David; Pascal Towbin; Sebastian Weber

doi:10.1162/rest_a_01435

Inferring Expectations from Observables: Evidence from the Housing Market

Itzhak Ben-David¹; Pascal Towbin²; Sebastian Weber³

¹ The Ohio State University and the National Bureau of Economic Research · ² Swiss National Bank · ³ International Monetary Fund

The Review of Economics and Statistics 2026

Abstract We propose a method to detect shifts in housing price expectations by observing excess capacity. Anticipated future price hikes lead to increased current supply, resulting in temporary vacancies. Using a structural vector autoregression with sign restrictions, we analyze the impact of these expectations on the U.S. housing market. Our findings indicate that price expectation shocks primarily drove the 1996–2006 boom, especially in the Sand States. At the boom’s peak, these shocks stemmed from unrealistic growth expectations, which reversed during the bust.

DOI: 10.1162/rest_a_01435
Volume: 108 (1)
Pages: 162-178
Language: en
Export: BibTeX
Sources: openalex crossref