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Housing purchases and the dynamics of housing wealth

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  • Olympia Bover

    ()
    (Banco de España)

Abstract

I model the purchase behavior of main and secondary housing by Spanish households using the panel sample from the first two waves of the Spanish household finance survey (EFF). I estimate discrete hazard models using retrospective and within-period purchase sequences. I also estimate an (S,s) model combining transactions data with longitudinal information on household wealth and housing stock values. I look at the role of adaptive expectations about the rate of return on housing and find they have a positive and signifi cant effect on the demand for houses. This is true for historical and within-period purchase probabilities as well as for the target ratio of housing wealth to total wealth. The volatility of house price growth has a negative effect on purchases for investment but a positive one on purchases for consumption.

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Bibliographic Info

Paper provided by Banco de Espa�a in its series Banco de Espa�a Working Papers with number 1036.

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Length: 43 pages
Date of creation: Dec 2010
Date of revision:
Handle: RePEc:bde:wpaper:1036

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Keywords: Household finance; house purchases; secondary homes; housing returns; adaptive expectations; (S; s) rule;

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  1. Eberly, J.C., 1990. "Adjustment of Consumers'durables Stocks: Evidence from Automobile Purchases," Weiss Center Working Papers, Wharton School - Weiss Center for International Financial Research 22-91, Wharton School - Weiss Center for International Financial Research.
  2. Hwang, Min & Quigley, John M., 2006. "Economic Fundamentals in Local Housing Markets: Evidence from U.S. Metropolitan Regions," Berkeley Program on Housing and Urban Policy, Working Paper Series, Berkeley Program on Housing and Urban Policy qt79d325cm, Berkeley Program on Housing and Urban Policy.
  3. Banks, James & Blundell, Richard & Oldfield, Zoë & Smith, James P., 2010. "House Price Volatility and the Housing Ladder," IZA Discussion Papers 5173, Institute for the Study of Labor (IZA).
  4. J. Bradford De Long & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1989. "Positive Feedback Investment Strategies and Destabilizing Rational Speculation," NBER Working Papers 2880, National Bureau of Economic Research, Inc.
  5. Monika Piazzesi & Martin Schneider, 2009. "Momentum Traders in the Housing Market: Survey Evidence and a Search Model," American Economic Review, American Economic Association, American Economic Association, vol. 99(2), pages 406-11, May.
  6. Javier Andrés & Óscar Arce & Carlos Thomas, 2010. "Banking competition, collateral constraints and optimal monetary policy," Banco de Espa�a Working Papers, Banco de Espa�a 1001, Banco de Espa�a.
  7. Patrick Bajari & Phoebe Chan & Dirk Krueger & Daniel Miller, 2013. "A Dynamic Model Of Housing Demand: Estimation And Policy Implications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 409-442, 05.
  8. Luigi Guiso & Tullio Jappelli, 1999. "Private Transfers, Borrowing Constraints and the Timing of Homeownership," CSEF Working Papers, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy 17, Centre for Studies in Economics and Finance (CSEF), University of Naples, Italy.
  9. Mark Andrew & Geoffrey Meen, 2003. "Housing Transactions and the Changing Decisions of Young Households in Britain: The Microeconomic Evidence," Real Estate Economics, American Real Estate and Urban Economics Association, American Real Estate and Urban Economics Association, vol. 31(1), pages 117-138, 03.
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