02326cas a2200253 a 4500 AALejournalIMF015421 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513596235 1018-5941 BD-DhAAL BD-DhAAL Towbin, Pascal. Price Expectations and the U.S. Housing Boom / Pascal Towbin, Sebastian Weber. Washington, D.C. : International Monetary Fund, 2015. 1 online resource (35 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students Between 1996 and 2006 the U.S. has experienced an unprecedented boom in house prices. As it has proven to be difficult to explain the large price increase by observable fundamentals, many observers have emphasized the role of speculation, id est expectations about future price developments. The argument is, however, often indirect: speculation is treated as a deviation from a benchmark. The present paper aims to identify house price expectation shocks directly. To that purpose, we estimate a VAR model for the U.S. and use sign restrictions to identify house price expectation, housing supply, housing demand, and mortgage rate shocks. House price expectation shocks are the most important driver of the boom and account for about 30 percent of the real house price increase. We also construct a model-based measure of exogenous changes in price expectations and show that this measure leads a survey-based measure of changes in house price expectations. Our main identification scheme leaves open whether expectation shifts are realistic or unrealistic. In extensions, we provide evidence that price expectation shifts during the boom were primarily unrealistic and were only marginally affected by realistic expectations about future fundamentals. Mode of access: Internet Weber, Sebastian. IMF Working Papers; Working Paper ; No. 2015/182 Full text available on IMF http://elibrary.imf.org/view/journals/001/2015/182/001.2015.issue-182-en.xml IMF e-Library