Inflation expectations have taken centre stage in the design of macroeconomic policy (D’Acunto et al. 2025, Gautier et al. 2020). As inflation surged in 2021 and 2022, central banks responded by tightening monetary policy, aiming to re-anchor consumer beliefs and regain price stability. The effectiveness of these actions depends on how households form expectations about future inflation, and how these expectations guide households’ spending decisions. In practice, households differ widely in both how they form these beliefs and how they act on them. As policymakers continue to confront persistent price pressures and the challenges of policy transmission, understanding this heterogeneity has become more important than ever.
Recent work has shown that consumers have vastly different views about inflation, shaped by personal experience, financial literacy, and exposure to economic news (Bruine de Bruin et al. 2010). These beliefs, in turn, influence important economic behaviours, including how much people save, borrow, and spend. But as research begins to map the channels through which expectations shape decisions, one dimension has remained surprisingly underexplored: housing.
Housing is not only a place to live – it is also a financial asset, a liability, and for many households, the single largest item in both categories. Homeownership provides insulation from rent increases, potential gains from rising property values, and, for those with mortgages, relief via inflation-driven debt erosion. But does owning a home also change how people think about inflation? Do renters pay less attention to inflation – and if so, can their expectations be more easily swayed by information?
To shed light on these questions, we used a series of randomised controlled trials on US households between 2021 and 2023, a period of high inflation. Our study (Piccolo and Gorodnichenko 2025) builds on the recent surge in research about inflation expectations (e.g. Coibion et al. 2022, Candia 2024), which shows that even simple information treatments – such as telling people about the Federal Reserve’s inflation target – can meaningfully shift beliefs. Prior studies typically reported average effects, without considering how the responsiveness to information might differ between renters and homeowners. Our research shows that for this high-inflation period, the distinction matters – a lot.
Different housing status, different information processing
Participants in our surveys were randomly assigned to receive information treatments about recent inflation outcomes, the Fed’s inflation target, or the Federal Open Market Committee (FOMC)’s inflation forecasts. By comparing how participants updated their beliefs about future inflation in response to these treatments, we were able to assess both the attentiveness of different groups and their baseline knowledge of inflation trends.
The results reveal systematic differences. Renters revised their inflation expectations much more than homeowners in response to the same information. This is consistent with inattention: the larger the revision, the more novel the information appears to the respondent. In contrast, homeowners – especially those without a mortgage – showed small revisions, suggesting their expectations already incorporated much of the information we provided. Mortgagors display an intermediate level of responsiveness, suggesting moderate prior awareness. These differences persist after accounting for observable household characteristics, suggesting they are not driven by selection into homeownership or correlated individual traits.
Why might renters pay less attention to inflation? One reason may be that their exposure to inflation is less direct in the short term. Rents tend to adjust slowly due to lease contracts and local rent control policies. In contrast, homeowners may be more attentive to inflation because they are less exposed to rent risk (Sinai and Souleles 2005) and more likely to view housing as a hedge against inflation (Han 2010, Han 2013). Past inflation experiences have also been shown to increase the appeal of property ownership as a form of wealth preservation (Malmendier and Wellsjo 2024), potentially reinforcing attention to inflation dynamics. In addition, homeowners appear more responsive to inflation-related sentiment (Li and Sinha 2023), which may heighten their attentiveness. Although mortgagors also stand to gain from inflation through debt erosion, prior research suggests that many households are unaware of this channel (Schnorpfeil et al. 2023), which may help explain their intermediate attentiveness in our sample.
Expectations drive behaviour, but only for some
Changing expectations is one thing; changing behaviour is another. To understand whether these belief shifts translated into economic decisions, we tracked participants’ durable consumption in the months following the surveys. We focused on purchases of big-ticket items like cars, appliances, and electronics – classic examples of intertemporal choices that can be influenced by inflation expectations.
Among homeowners, we found a strong and significant relationship: those whose inflation expectations increased after the information treatment were more likely to have made a durable purchase within four months. Quantitatively, a one-percentage-point increase in inflation expectations raised the probability of making a durable purchase by 1.5 percentage points. The effect was particularly pronounced for homeowners without mortgages.
For renters, the pattern was different. Despite showing larger belief revisions, renters did not significantly increase their durable purchases. One likely explanation is liquidity constraints. Renters may become more pessimistic about future prices but lack the financial flexibility to act on those beliefs – either because they have fewer savings or because credit is harder to access.
Implications for policy and macroeconomic modelling
These findings matter for how we think about the transmission of monetary policy. Households are not passive observers of inflation; their expectations help shape economic activity. But if different groups form and act on these expectations in different ways, the aggregate effect of inflation surprises or policy signals may be weaker or more uneven than models predict.
Our results suggest a fundamental tension for policymakers. Renters are more malleable in their beliefs, but less able to change their consumption choices. Homeowners, especially those without mortgages, are more likely to adjust their consumption but harder to influence through information campaigns. This heterogeneity has clear implications for how central banks communicate, especially during periods of economic stress or high uncertainty. Tailoring messages to specific audiences or combining communication with complementary policies (e.g. easing credit access for liquidity-constrained households) could improve policy effectiveness.
More broadly, these results point to the importance of incorporating household heterogeneity into macroeconomic models. Aggregate models that treat all consumers alike may miss key distributional channels through which inflation expectations affect the real economy. Explicitly accounting for ownership status, financial constraints, and attention to news can help policymakers design better stabilisation tools and avoid unintended consequences that fall unevenly across the population.
Looking ahead
In times of macroeconomic volatility, inflation expectations are more than a theoretical construct: they are a window into how real people navigate economic uncertainty. As our findings show, housing – often viewed as a driver of wealth inequality – also plays a central role in shaping how people perceive and respond to inflation. Recognising and responding to this heterogeneity is not just a matter of fairness – it is a matter of effective policymaking.
References
Bruine de Bruin, W, W Vanderklaauw, J S Downs, B Fischhoff, G Topa and O Armantier (2010), “Expectations of inflation: The role of demographic variables, expectation formation, and financial literacy”, Journal of Consumer Affairs 44(2): 381–402.
Coibion, O, Y Gorodnichenko and M Weber (2022), “Monetary policy communications and their effects on household inflation expectations”, Journal of Political Economy 130(6): 1537–84.
Candia, B (2024), “Inflation expectations and household spending: Different patterns in low- and high-inflation settings”, NBER Working Paper 33595.
D’Acunto, F, E Charalambakis, D Georgarakos, G Kenny, J Meyer and M Weber (2024), “Household inflation expectations: Taking stock of the recent research insights for monetary policy”, VoxEU.org, 1 August.
Gautier, E, E Mengus and P Andrade (2020), “How households’ inflation expectations matter”, VoxEU.org, 4 August.
Sinai, T and N S Souleles (2005), “Owner-occupied housing as a hedge against rent risk”, Quarterly Journal of Economics 120(2): 763–89.
Han, L (2010), “The effects of price risk on housing demand: Empirical evidence from us markets”, Review of Financial Studies 23(11): 3889–928.
Han, L (2013), “Understanding the puzzling risk-return relationship for housing”, Review of Financial Studies 26(4): 877–928.
Malmendier, U and A S Wellsjo (2024), “Rent or buy? inflation experiences and homeownership within and across countries”, Journal of Finance 79(3): 1977–2023.
Li, G and N R Sinha (2023), “Are real assets owners less averse to inflation? evidence from consumer sentiments and inflation expectations”, NBER Working Paper 33595.
Piccolo, J and Y Gorodnichenko (2025), “Homeownership and Attention to Inflation: Evidence from Information Treatments”, CEPR Discussion Paper 20087.
Schnorpfeil, P, M Weber and A Hackethal (2023), “Households’ response to the wealth effects of inflation”, NBER Working Paper 31672.
