Housing Market Dynamics with Search Frictions

Miroslav Gabrovski and Victor Ortego-Marti

No 201804, Working Papers from University of California at Riverside, Department of Economics

Abstract: This paper develops a business cycle model of the housing market with search frictions and entry of both buyers and sellers. The housing market exhibits a well-established cyclical component, which features three stylized facts: prices move in the same direction as sales and the number of houses for sale, but opposite to the time it takes to sell a house. These stylized facts imply that in the data vacancies and the number of buyers are positively correlated, i.e. that the Beveridge Curve is upward sloping. A baseline search and matching model of the housing market is unable to match these stylized facts because it inherently generates a downward sloping Beveridge Curve. With free entry of both buyers and sellers, our model reproduces the positive correlation between prices, sales, and housing vacancies, and matches the stylized facts qualitatively and quantitatively.

Keywords: Housing market; business cycles; search and matching; Beveridge Curve (search for similar items in EconPapers)
JEL-codes: E2 E32 R21 R31 (search for similar items in EconPapers)
Pages: 27 Pages
Date: 2018-03
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 (5)

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Persistent link: https://EconPapers.repec.org/RePEc:ucr:wpaper:201804

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