Search, Liquidity And The Dynamics Of House Prices And Construction

Allen Head (), Hongfei Sun () and Huw Lloyd-Ellis

No 1276, Working Paper from Economics Department, Queen's University

Abstract: We characterize the dynamics of relative house prices, housing sales, construction rates and population growth in response to city-specific income shocks for 106 US cities. We then develop a dynamic search model of the housing market in which construction, the entry of buyers, house prices and sales are endogenously determined in equilibrium. Our theory generates dynamics that are qualitatively consistent with our empirical observations and a version of the economy calibrated to match long-run features of the housing market in U.S. cities offers a substantial quantitative improvement over similar models with no search. In particular, variation in the time it takes to sell a house (i.e. the house's liquidity) induces house values and transaction prices to exhibit momentum, or serially correlated growth.

Keywords: House prices; liquidity; search; construction; dynamic panel (search for similar items in EconPapers)
JEL-codes: E30 R10 R31 (search for similar items in EconPapers)
Pages: 70 pages
Date: 2012-09
New Economics Papers: this item is included in nep-dge, nep-mac and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (35)

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https://www.econ.queensu.ca/sites/econ.queensu.ca/files/qed_wp_1276.pdf First version 2012 (application/pdf)

Related works:
Journal Article: Search, Liquidity, and the Dynamics of House Prices and Construction (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:qed:wpaper:1276

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