Spatial distribution of housing liquidity

Francisco Amaral, Mark Toth and Jonas Zdrzalek

No 2284, Kiel Working Papers from Kiel Institute for the World Economy (IfW Kiel)

Abstract: This paper examines the relationship between location, liquidity, and prices in housing markets. We construct spatial datasets for German and U.S. cities and show that liquidity and prices decline with distance to the city center. To rationalize these results, we build a structural model with spatial search frictions. We argue that location preferences concentrate buyers in central areas, making markets tighter, more liquid, and driving up prices. Counterfactuals show that suppressing search frictions raises welfare and prices, especially in peripheral areas. Our findings highlight the importance of demand-side preferences and search frictions for understanding liquidity and asset prices.

Keywords: housing liquidity; housing prices; cities; spatial equilibrium; housing demand; asset pricing (search for similar items in EconPapers)
JEL-codes: G12 G51 R21 R30 (search for similar items in EconPapers)
Date: 2025, Revised 2025
New Economics Papers: this item is included in nep-geo and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:315471

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