Search, Liquidity and the Dynamics of House Prices and Construction

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

No 274074, Queen's Economics Department Working Papers from Queen's University - Department of Economics

Abstract: We characterize the dynamics of relative house prices, housing sales, construction rates and population growth in response to city-specific income shocks for 106 US cities. We then develop a dynamic search model of the housing market in which construction, the entry of buyers, house prices and sales are endogenously determined in equilibrium. Our theory generates dynamics that are qualitatively consistent with our empirical observations and a version of the economy calibrated to match long-run features of the housing market in U.S. cities offers a substantial quantitative improvement over similar models with no search. In particular, variation in the time it takes to sell a house (i.e. the house's liquidity) induces house values and transaction prices to exhibit momentum, or serially correlated growth.

Keywords: Financial Economics; Labor and Human Capital (search for similar items in EconPapers)
Pages: 71
Date: 2012-09
References: Add references at CitEc
Citations:

Downloads: (external link)
https://ageconsearch.umn.edu/record/274074/files/qed_wp_1276.pdf (application/pdf)

Related works:
Journal Article: Search, Liquidity, and the Dynamics of House Prices and Construction (2014)
Working Paper: Search, Liquidity And The Dynamics Of House Prices And Construction (2012)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ags:quedwp:274074

DOI: 10.22004/ag.econ.274074

Access Statistics for this paper

More papers in Queen's Economics Department Working Papers from Queen's University - Department of Economics Contact information at EDIRC.
Bibliographic data for series maintained by AgEcon Search ().