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The Propagation of Demand Shocks through Housing Markets

Elliot Anenberg and Daniel Ringo

American Economic Journal: Macroeconomics, 2022, vol. 14, issue 3, 481-507

Abstract: Housing demand stimulus produces a multiplier effect by freeing up owners attempting to sell their current home, allowing them to reenter the market as buyers. Exploiting a shock to first-time home buyer demand caused by a cut in mortgage insurance premiums, we find that homeowners buy their next home sooner when the probability of their current home selling increases. We build and calibrate a search model that explains these findings as a result of homeowners avoiding the cost of owning two homes simultaneously. Simulations demonstrate that stimulus to home buying generates a substantial multiplier effect, particularly in cold markets.

JEL-codes: R21 R31 R38 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1257/mac.20200037

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