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Housing purchases and the dynamics of housing wealth

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  • Bover, Olympia

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 significant 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 C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8128.

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Date of creation: Dec 2010
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Handle: RePEc:cpr:ceprdp:8128

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

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  1. Min Hwang & John M. Quigley, 2006. "Economic Fundamentals In Local Housing Markets: Evidence From U.S. Metropolitan Regions," Journal of Regional Science, Wiley Blackwell, vol. 46(3), pages 425-453.
  2. Bajari, Patrick & Chan, Phoebe & Krueger, Dirk & Miller, Daniel, 2010. "A Dynamic Model of Housing Demand: Estimation and Policy Implications," CEPR Discussion Papers 7911, C.E.P.R. Discussion Papers.
  3. James Banks & Richard Blundell & Zoe Oldfield & James P. Smith, 2010. "House Price Volatility and the Housing Ladder," Working Papers 786, RAND Corporation Publications Department.
  4. Javier Andrés & Óscar Arce & Carlos Thomas, 2010. "Banking competition, collateral constraints and optimal monetary policy," Banco de Espa�a Working Papers 1001, Banco de Espa�a.
  5. Monika Piazzesi & Martin Schneider, 2009. "Momentum traders in the housing market: survey evidence and a search model," Staff Report 422, Federal Reserve Bank of Minneapolis.
  6. Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-36, June.
  7. Guiso, Luigi & Jappelli, Tullio, 2002. "Private Transfers, Borrowing Constraints and the Timing of Homeownership," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 315-39, May.
  8. 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.
  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, vol. 31(1), pages 117-138, 03.
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