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Housing Adjustment Costs: Their Impact on Mobility and Housing Demand Elasticities

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  • Oskar R. Harmon
  • Michael J. Potepan

Abstract

The role of housing adjustment costs in influencing mobility decisions, and the relationship between these and housing demands is not well understood. Here we try to examine how changes in adjustment costs as well as in such demand factors as income, influence the decision of households to adjust their housing consumption through moving. Empirically, we use a sample of recently moving homeowners from the PSID and provide evidence indicating adjustment costs are more important than other demand factors in influencing mobility decisions. We also argue that sample selection may bias estimates of housing demand elasticities when the sample is restricted to recent movers because the influence of adjustment costs in the mobility decision are not accounted for. Testing for this using the Heckman two‐stage procedure, however, showed this was not a significant problem.

Suggested Citation

  • Oskar R. Harmon & Michael J. Potepan, 1988. "Housing Adjustment Costs: Their Impact on Mobility and Housing Demand Elasticities," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 16(4), pages 459-478, December.
    • Handle: RePEc:bla:reesec:v:16:y:1988:i:4:p:459-478
    DOI: 10.1111/1540-6229.00468
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    Cited by:

    1. Mark Andrew & Alan Evans & Phoebe Koundouri & Geoffrey Meen, 2003. "Residential stamp duty:Time for a change," DEOS Working Papers 0304, Athens University of Economics and Business.
    2. Jintao Li & Xin Ning & Jun Sun & Xiaoqian Xiong, 2018. "Simulating the Barriers of Transaction Costs to Public Rental Housing Exits: The Case of Wuhan, China," Sustainability, MDPI, vol. 10(5), pages 1-13, May.
    3. K K Tang, 1998. "Property Markets and Policies in an Intertemporal General Equilibrium Model," Departmental Working Papers 1999-01, The Australian National University, Arndt-Corden Department of Economics, revised Jan 1999.
    4. Chan, Sewin, 1996. "Residential mobility and mortgages," Regional Science and Urban Economics, Elsevier, vol. 26(3-4), pages 287-311, June.
    5. James A. Gosling & Geoffrey Keogh & Michael J. Stabler, 1993. "House Extensions and Housing Market Adjustment: A Case-study of Wokingham," Urban Studies, Urban Studies Journal Limited, vol. 30(9), pages 1561-1576, November.
    6. Jacco Hakfoort & Robert Lie, 1996. "Office Space per Worker: Evidence from Four European Markets," Journal of Real Estate Research, American Real Estate Society, vol. 11(2), pages 183-196.
    7. Sewin Chan, 1995. "Residential Mobility and Mortgages," NBER Working Papers 5181, National Bureau of Economic Research, Inc.

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