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Speculation is a critical channel through which credit supply expansion affects the housing cycle. The surge in private label mortgage securitization in 2003 fueled a large expansion in mortgage credit supply by lenders financed with non-core deposits. Areas more exposed to these lenders experienced a large relative rise in transaction volume driven by a small group of speculators, and these areas simultaneously witnessed an amplified housing boom and bust. Consistent with the importance of belief heterogeneity, house price growth expectations of marginal buyers rose during the boom, while housing market pessimism among the general population increased.