This paper studies expectations of capital appreciation in the housing market. We show that expectations impounded in the rent/price ratio at the beginning of the decade successfully predict appreciation rates, but only if we first control for cross-sectional differences in the quality of rental...

We combine a standard stock-flow housing market model, incorporating explicit relationships between house prices, the housing stock, and the rent level, with a parsimonious expectation formation scheme of housing market investors, reflecting an evolving mix of extrapolative and regressive...

We investigate the feature of housing markets under adaptive and heterogeneous expectations. Model agents have finite horizons and borrowings are constrained by the collateral value of housing stock. Our model shows that expectation-driven house price dynamics constantly change the direction of...