Search, Liquidity, and the Dynamics of House Prices and Construction

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

American Economic Review, 2014, vol. 104, issue 4, 1172-1210

Abstract: The dynamics of house prices, sales, construction, and population growth in response to city-specific income shocks are characterized for 106 US cities. A dynamic model of search in the housing market in which construction, the entry of buyers, house prices, and sales are determined in equilibrium is then developed. The theory generates dynamics qualitatively consistent with the observations and a version calibrated to match key features of the US housing market offers a substantial quantitative improvement over models without search. In particular, variation in the time it takes to sell induces transaction prices to exhibit serially correlated growth.

JEL-codes: D83 R21 R23 R31 (search for similar items in EconPapers)
Date: 2014
Note: DOI: 10.1257/aer.104.4.1172
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Citations: View citations in EconPapers (127)

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Working Paper: Search, Liquidity And The Dynamics Of House Prices And Construction (2012)
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