A DYNAMIC MODEL OF HOUSING DEMAND: ESTIMATION AND POLICY IMPLICATIONS*. (17th April 2013)

• Record Type: Journal Article
• Authors: Bajari, Patrick; Chan, Phoebe; Krueger, Dirk; Miller, Daniel
• Is Part Of: International economic review. Volume 54:Number 2(2013:May)
• Page Start: 409
• Page End: 442
• Publication Date: 2013-04-17
• Subjects: Economics -- Periodicals; 330.05
• DOI: 10.1111/iere.12001
• Languages: English
• ISSNs: 0020-6598

Abstract

<abstract abstract-type="main" xml:lang="en"> <title> <x xml:space="preserve">Abstract</x> </title> <p>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.</p> </abstract>