Buyers' Optimistic Housing Expectations Drove Prices Up, But Falling Confidence Could Lead to More Mortgage Delinquencies

Buyers' optimistic expectations about future housing price increases drove rapid price gains, creating "bubbles" that often lead to inflated prices.

During the pandemic, initially optimistic buyers were 50% more likely to pause mortgage payments when expectations dropped, even as prices kept rising.

Borrowers react more to future expectations than current conditions, underscoring the impact of expectations on housing markets and the economy.

Falling expectations in 2023 could make recent optimistic borrowers vulnerable if combined with job loss or negative equity.

Understanding borrower expectations is essential for policymakers to better forecast and regulate housing markets.