Are housing prices predictable? If so, do households take into account it when making their portfolio choices? We document the existence of housing returns predictability in the US at the aggregate and regional level. We study a model, in which housing prices are predictable and adjustment costs...

We generalize the classic Grossman and Laroque (1990) (GL) model of optimal portfolio choice with housing and transaction costs by introducing predictability in house prices. As in the GL model, agents only move to more expensive (cheaper) houses when their wealth-to-housing ratios reach an...

Are housing returns predictable? If so, do households take them into account when making their housing consumption and portfolio decisions? We document the existence of housing return predictability in the U.S. at the aggregate, census region, and state level. We study a portfolio choice model...

Are housing returns predictable? If so, do households take them into account when making their housing consumption and portfolio decisions? We document the existence of housing return predictability in the U.S. at the aggregate, census region, and state level. We study a portfolio choice model...

We study a model of portfolio choice with housing in which house price is predictable. Housing is illiquid in that a transaction cost must be paid when the house is sold. We show that two state variables aff ect the agent's decisions: (i) the wealth-houseratio, and (ii) the time-varying mean...

Are housing returns predictable? If so, do households take them into account when making their housing consumption and portfolio decisions? We document the existence of housing return predictability in the U.S. at the aggregate, census region, and state level. We study a portfolio choice model...

We generalize the classic Grossman and Laroque (1990) (GL) model of optimal portfolio choice with housing and transaction costs by introducing predictability in house prices. As in the GL model, agents only move to more expensive (cheaper) houses when their wealth-to-housing ratios reach an...

Households systematically overvalue or undervalue their houses. We compute house value misperception as the difference between self-reported and market house values. Misperception is sizable, countercyclical, and persistent. We find that a 1 percent increase in house overvaluation results, on...