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Buying First or Selling First in Housing Markets

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  • Moen, Espen R.
  • Nenov, Plamen T.
  • Sniekers, Florian

Abstract

Housing transactions by owner-occupiers take two steps, purchase of a new property and sale of the old housing unit. This paper shows how the transaction sequence decision of owner-occupiers depends on, and in turn, affects housing market conditions in an equilibrium search-and-matching model of the housing market. We show that home-owners prefer to buy first whenever there are more buyers than sellers in the market. This behavior leads to multiple steady state equilibria and to self-fulfilling fluctuations in prices and time-on-market. Equilibrium switches creates large fluctuations in the housing market, which are broadly consistent with stylized facts on the housing cycle.

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  • Moen, Espen R. & Nenov, Plamen T. & Sniekers, Florian, 2015. "Buying First or Selling First in Housing Markets," CEPR Discussion Papers 10342, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:10342
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    Cited by:

    1. Ngai, Liwa Rachel & Sheedy, Kevin, 2020. "The Ins and Outs of Selling Houses: Understanding Housing Market Volatility," CEPR Discussion Papers 14331, C.E.P.R. Discussion Papers.
    2. Elliot Anenberg & Daniel R. Ringo, 2019. "The Propagation of Demand Shocks Through Housing Markets," Finance and Economics Discussion Series 2019-084, Board of Governors of the Federal Reserve System (U.S.).
    3. Antonia Díaz & Belén Jerez & Juan Pablo Rincón-Zapatero, 2023. "Housing Prices and Credit Constraints in Competitive Search," The Economic Journal, Royal Economic Society, vol. 134(657), pages 220-270.
    4. Leung, Charles Ka Yui & Tse, Chung-Yi, 2017. "Flipping in the housing market," Journal of Economic Dynamics and Control, Elsevier, vol. 76(C), pages 232-263.
    5. Jan Eeckhout & Ilse Lindenlaub, 2019. "Unemployment Cycles," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(4), pages 175-234, October.
    6. Espen R Moen & Plamen T Nenov & Florian Sniekers, 2021. "Buying First or Selling First in Housing Markets," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 38-81.
    7. 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.
    8. Ilse Lindenlaub, 2015. "Unemployment Cycles," 2015 Meeting Papers 1368, Society for Economic Dynamics.
    9. Eric Smith & Zoe Xie & Lei Fang, 2022. "The Short and the Long of It: Stock-Flow Matching in the US Housing Market," CESifo Working Paper Series 10035, CESifo.
    10. Alina Arefeva, 2016. "How Auctions Amplify House-Price Fluctuations," 2016 Meeting Papers 714, Society for Economic Dynamics.
    11. Kircher, Philipp & Wright, Randall & Julien, Benoit & Guerrieri, Veronica, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.
    12. 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.
    13. Liberati, Danilo & Loberto, Michele, 2019. "Taxation and housing markets with search frictions," Journal of Housing Economics, Elsevier, vol. 46(C).
    14. Yu Zhu & Randall Wright & Damien Gaumont, 2017. "Modeling House Prices," 2017 Meeting Papers 744, Society for Economic Dynamics.
    15. Lawrence Kryzanowski & Yanting Wu & Tingyu Zhou, 2023. "Conflicts of interest and agent heterogeneity in buyer brokerage," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 51(1), pages 130-169, January.
    16. Erlend Eide Bø, 2019. "Buy to let. Investment buyers in a housing search model," Discussion Papers 896, Statistics Norway, Research Department.

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    More about this item

    Keywords

    Housing market; Search frictions; Order of transactions; Strategic complementarities;
    All these keywords.

    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

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