House price expectations play a crucial role in housing dynamics, but there is limited understanding of the mechanisms that determine them. This paper analyzes to what extent the expectations of Italian households respond to information on past house price growth, during a period of high inflation and high interest rates, using data from the Bank of Italy Conjunctural Survey on Italian Household.
The analysis shows that households tend to revise their expectations in the direction of the gap between the recent actual house price change and the perceived change. The effect is more pronounced among households most affected by inflation, women, young people, and when the actual price growth is lower than what households perceive.
