Finance and Economics Discussion Series (FEDS)
May 2026
Price-Segmented Beliefs and the U.S. Housing Boom
Abstract:
This paper shows that expected capital gains in several MSAs were higher for relatively lower-priced, rather than higher-priced, houses during the U.S. boom of the 2000s. Because buyers of lower-priced houses tend to be more sensitive to credit conditions than buyers of higher-priced houses, this paper documents patterns that are consistent with an interaction of beliefs and credit conditions in a time period where direct evidence on house price beliefs is scarce. Documenting this interaction is important for unifying beliefs and credit conditions as joint, instead of competing, explanations for the U.S. housing boom of the 2000s.
Keywords: Housing booms, beliefs, transaction data
DOI: https://doi.org/10.17016/FEDS.2026.022
PDF: Full Paper
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