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The Propagation of Demand Shocks through Housing Markets

Author

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  • Elliot Anenberg
  • Daniel Ringo

Abstract

Housing demand stimulus produces a multiplier effect by freeing up owners attempting to sell their current home, allowing them to reenter the market as buyers. Exploiting a shock to first-time home buyer demand caused by a cut in mortgage insurance premiums, we find that homeowners buy their next home sooner when the probability of their current home selling increases. We build and calibrate a search model that explains these findings as a result of homeowners avoiding the cost of owning two homes simultaneously. Simulations demonstrate that stimulus to home buying generates a substantial multiplier effect, particularly in cold markets.

Suggested Citation

  • Elliot Anenberg & Daniel Ringo, 2022. "The Propagation of Demand Shocks through Housing Markets," American Economic Journal: Macroeconomics, American Economic Association, vol. 14(3), pages 481-507, July.
    • Handle: RePEc:aea:aejmac:v:14:y:2022:i:3:p:481-507
    DOI: 10.1257/mac.20200037
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    References listed on IDEAS

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    1. Antonia Díaz & Belén Jerez, 2013. "House Prices, Sales, And Time On The Market: A Search‐Theoretic Framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(3), pages 837-872, August.
    2. Antonia Díaz & Belén Jerez, 2013. "House Prices, Sales, And Time On The Market: A Search‐Theoretic Framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 837-872, August.
    3. Elliot Anenberg & Patrick Bayer, 2020. "Endogenous Sources Of Volatility In Housing Markets: The Joint Buyer–Seller Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(3), pages 1195-1228, August.
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    Cited by:

    1. Badarinza, Cristian & Ramadorai, Tarun & Siljander, Juhana & Tripathy, Jagdish, 2024. "Behavioral lock-in: aggregate implications of reference dependence in the housing market," Bank of England working papers 1054, Bank of England.
    2. Lei Fang & Eric Smith & Zoe Xie, 2022. "The Short and the Long of It: Stock-Flow Matching in the US Housing Market," FRB Atlanta Working Paper 2022-15, Federal Reserve Bank of Atlanta.
    3. Bruno Albuquerque & Martin Iseringhausen & Frederic Opitz, 2024. "The Housing Supply Channel of Monetary Policy," IMF Working Papers 2024/023, International Monetary Fund.

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    More about this item

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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