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The 2000s Housing Cycle With 2020 Hindsight: A Neo-Kindlebergerian View / Gabriel Chodorow-Reich, Adam M. Guren, Timothy J. McQuade.
- Format:
- Book
- Author/Creator:
- Chodorow-Reich, Gabriel.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w29140.
- NBER working paper series no. w29140
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2021.
- Summary:
- With "2020 hindsight," the 2000s housing cycle is not a boom-bust but a boom-bust- rebound. Using a spatial equilibrium regression in which house prices are determined by income, amenities, urbanization, and supply, we show that long-run city-level fundamentals predict not only 1997-2019 price and rent growth but also the amplitude of the boom-bust-rebound. This evidence motivates our model of a cycle rooted in fundamentals. Households learn about fundamentals by observing "dividends" but become over-optimistic in the boom due to diagnostic expectations. A bust ensues when beliefs start to correct, exacerbated by a price-foreclosure spiral that drives prices below their long-run level. The rebound follows as prices converge to a path commensurate with higher fundamental growth. The estimated model explains the boom-bust-rebound with a single shock and accounts quantitatively for the dynamics of prices, rents, and foreclosures in cities with the largest cycles. We draw implications for asset cycles more generally.
- Notes:
- Print version record
- August 2021.
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