The Modeling of Boom and Bust in Tehran Housing

Housing sector fluctuations have many impacts on economic growth، job creating and households welfare. So، it is very important to determine main reasons of speculative bubbles in housing markets. There is almost general agreement about the role of expectations of buyers and sellers in making of speculative bubbles but، only a few researches try to model it. In this research we try to model speculative bubble in Tehran housing market using agent- based economics. Agents have heterogeneous expectations about long-run fundamentals but change their views because of «social dynamics». Agents meet randomly and those with tighter priors are more likely to convert other agents to their beliefs. Results of modeling show the role of non-fundamentals and heterogeneous expectations in speculative bubbles in the Tehran housing market