Working Paper

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 loose 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.

JEL Classification: D14; D91; R21; R31;

https://doi.org/10.17016/FEDS.2026.022

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: Finance and Economics Discussion Series

Publication Date: 2026-05-04

Number: 2026-025