History dependence in the housing market

Philippe Bracke and Silvana Tenreyro

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Using the universe of housing transactions in England and Wales in the last twenty years, we document a robust pattern of history dependence in housing markets. Sale prices and selling probabilities today are affected by aggregate house prices prevailing in the period in which properties were previously bought. We investigate the causes of history dependence, with its quantitative implications for the post-crisis recovery of the housing market. To do so we complement our analysis with administrative data on mortgages and online house listings, which we match to actual sales. We find that high leverage in the pre-crisis period and anchoring (or reference dependence) both contributed to the collapse and slow recovery of the volume of housing transactions. We find no asymmetric effects of anchoring to previous prices on current transactions; in other words, loss aversion does not appear to play a role over and above simple anchoring.

Keywords: housing market; fluctuations; down-payment effects; reference dependence; anchoring; loss aversion labor market frictions; capital market frictions; volatility; labor market fluidity (search for similar items in EconPapers)
JEL-codes: J1 (search for similar items in EconPapers)
Pages: 56 pages
Date: 2016-10
New Economics Papers: this item is included in nep-his and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://eprints.lse.ac.uk/86176/ Open access version. (application/pdf)

Related works:
Journal Article: History Dependence in the Housing Market (2021)
Working Paper: History dependence in the housing market (2021)
Working Paper: History dependence in the housing market (2018)
Working Paper: History dependence in the housing market (2018)
Working Paper: History dependence in the housing market (2018)
Working Paper: History Dependence in the Housing Market (2017)
Working Paper: History Dependence in the Housing Market (2016)
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