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Understanding Recent Trends in House Prices and Home Ownership

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  • Shiller, Robert J.

    (Yale U)

Abstract

This paper looks at a broad array of evidence concerning the recent boom in home prices, and considers what this means for future home prices and the economy. It does not appear possible to explain the boom in terms of fundamentals such as rents or construction costs. A psychological theory, that represents the boom as taking place because of a feedback mechanism or social epidemic that encourages a view of housing as an important investment opportunity, fits the evidence better. Three case studies of past booms are considered for comparison: the US housing boom of 1950, the US farmland boom of the 1970s, and the temporary interruption 2004-5 of the UK housing boom. The paper concludes that while it is possible that prices will continue to go up as is commonly expected, there is a high probability of steady and substantial real home price declines extending over years to come.

Suggested Citation

  • Shiller, Robert J., 2007. "Understanding Recent Trends in House Prices and Home Ownership," Working Papers 28, Yale University, Department of Economics.
    • Handle: RePEc:ecl:yaleco:28
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand

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