Housing Prices and Credit Constraints in Competitive Search

Antonia Díaz, Belén Jerez and Juan Pablo Rincón-Zapatero

The Economic Journal, 2023, vol. 134, issue 657, 220-270

Abstract: Wealthier, risk-averse buyers pay more to speed up transactions in competitive search markets. This result is established in a dynamic housing model where households save to smooth consumption and build a down payment. ‘Block recursivity’ is ensured by the existence of risk-neutral housing intermediaries. In the long run, the calibrated benchmark features higher indebtedness and house prices than a Walrasian model, especially when housing supply elasticity is low. The long-run price effects of greater credit availability are much larger if rental and owner-occupied stocks are segmented, but even without segmentation they can be substantial when supply elasticity is low.

Date: 2023
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Journal Article: Housing Prices and Credit Constraints in Competitive Search (2024)
Working Paper: Housing Prices and Credit Constraints in Competitive Search (2022)
Working Paper: Housing prices and credit constraints in competitive search (2020)
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