ENDOGENOUS SOURCES OF VOLATILITY IN HOUSING MARKETS: THE JOINT BUYER–SELLER PROBLEM. (23rd May 2020)

• Record Type: Journal Article
• Authors: Anenberg, Elliot; Bayer, Patrick
• Is Part Of: International economic review. Volume 61:Number 3(2020)
• Page Start: 1195
• Page End: 1228
• Publication Date: 2020-05-23
• Subjects: Economics -- Periodicals; 330.05
• DOI: 10.1111/iere.12454
• Languages: English
• ISSNs: 0020-6598

Abstract

Abstract: This article presents new empirical evidence that internal movement—selling one home and buying another—by existing homeowners within a metropolitan housing market is especially volatile and a substantial driver of fluctuations in transaction volume over the housing market cycle. We develop a search model that shows that the strong procyclicality of internal movement is driven by the cost of simultaneously holding two homes, which varies endogenously over the cycle. The estimated model shows that frictions related to this joint buyer–seller problem substantially amplify cyclical price volatility in housing markets.