A DYNAMIC MODEL OF HOUSING DEMAND: ESTIMATION AND POLICY IMPLICATIONS

Patrick Bajari, Phoebe Chan, Dirk Krueger and Daniel Miller

International Economic Review, 2013, vol. 54, issue 2, 409-442

Abstract: Using data from the PSID, we estimate a dynamic model of housing demand with nonconvex adjustment costs, credit constraints, and uncertainty about income and home prices. We simulate how consumer behavior responds to house price and income declines as well as tightening credit. In response to a negative home price shock, households early in the life cycle climb the housing ladder more quickly and invest more in housing assets due to the lower price. With a concurrent negative income shock, however, housing demand falls among young and middle aged households who stay in smaller homes rather than to trade up.

Date: 2013
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https://doi.org/10.1111/iere.12001

Related works:
Working Paper: A Dynamic Model of Housing Demand: Estimation and Policy Implications (2010)
Working Paper: A Dynamic Model of Housing Demand: Estimation and Policy Implications (2010)
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