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Winners and Losers in House Markets

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Author Info

  • Nobuhiro Kiyotaki

    ()
    (Princeton University)

  • Alexander Michaelides

    ()
    (Central Bank of Cyprus and London School of Economics)

  • Kalin Nikolov

    ()
    (Bank of England and London School of Economics)

Abstract

This paper is a quantitatively-oriented theoretical study of the interaction between housing prices, aggregate production, and household behavior over a lifetime. We develop a life-cycle model of a production economy in which land and capital are used to build residential and commercial real estates. We find that, in an economy where the share of land in the value of real estates is large, housing prices react more to an exogenous change in expected productivity or the world interest rate, causing a large redistribution between net buyers and net sellers of houses. Changing financing constraints, however, has limited effects on housing prices.

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File URL: http://www.centralbank.gov.cy/media/pdf/NPWPE_No5_072010.pdf
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Bibliographic Info

Paper provided by Central Bank of Cyprus in its series Working Papers with number 2010-5.

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Length: 57 pages
Date of creation: Jul 2010
Date of revision:
Handle: RePEc:cyb:wpaper:2010-5

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Web page: http://www.centralbank.gov.cy/nqcontent.cfm?a_id=1
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Related research

Keywords: Real estates; land; housing prices; life cycle; collateral constraints;

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References

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  1. Martin Gervais, 1998. "Housing Taxation and Capital Accumulation," UWO Department of Economics Working Papers 9807, University of Western Ontario, Department of Economics.
  2. Del Negro, Marco & Otrok, Christopher, 2007. "99 Luftballons: Monetary policy and the house price boom across U.S. states," Journal of Monetary Economics, Elsevier, vol. 54(7), pages 1962-1985, October.
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  9. Hanno N. Lustig & Stijn G. Van Nieuwerburgh, 2005. "Housing Collateral, Consumption Insurance, and Risk Premia: An Empirical Perspective," Journal of Finance, American Finance Association, vol. 60(3), pages 1167-1219, 06.
  10. Sven Rady, 2001. "Housing Market Dynamics: on the Contribution of Income Shocks and Credit Constraints," FMG Discussion Papers dp375, Financial Markets Group.
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  18. repec:att:wimass:9722 is not listed on IDEAS
  19. Stijn Van Nieuwerburgh & Pierre-Olivier Weill, 2010. "Why Has House Price Dispersion Gone Up?," Review of Economic Studies, Oxford University Press, vol. 77(4), pages 1567-1606.
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  22. Piazzesi, Monika & Schneider, Martin & Tuzel, Selale, 2007. "Housing, consumption and asset pricing," Journal of Financial Economics, Elsevier, vol. 83(3), pages 531-569, March.
  23. Morris A. Davis & Michael G. Palumbo, 2006. "The price of residential land in large U.S. cities," Finance and Economics Discussion Series 2006-25, Board of Governors of the Federal Reserve System (U.S.).
  24. Morris A. Davis & Francois Ortalo-Magne, 2011. "Household Expenditures, Wages, Rents," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 14(2), pages 248-261, April.
  25. Pierre-Olivier Gourinchas & Jonathan A. Parker, 1999. "Consumption Over the Life Cycle," NBER Working Papers 7271, National Bureau of Economic Research, Inc.
  26. V. Sanchez-Marcos & J.V.Rios-Rull, 2005. "Aggregate Shocks and the Volatility of House Prices," 2005 Meeting Papers 648, Society for Economic Dynamics.
  27. Hurst, Erik & Stafford, Frank, 2004. "Home Is Where the Equity Is: Mortgage Refinancing and Household Consumption," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 36(6), pages 985-1014, December.
  28. Andrew Haughwout & Robert P. Inman, 2000. "Fiscal Policies in Open Cities with Firms and Households," NBER Working Papers 7823, National Bureau of Economic Research, Inc.
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Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Winners and Losers in House Markets
    by Christian Zimmermann in NEP-DGE blog on 2010-11-05 18:36:34
  2. US house prices have to fluctuate more than elsewhere
    by Economic Logician in Economic Logic on 2010-11-12 15:48:00
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