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Short-Term Buyers and Housing Market Dynamics

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  • Robert Edelstein

  • Wenlan Qian

Abstract

This study demonstrates that taking into account heterogeneous investment horizons will improve our understanding of housing price and trading dynamics. Using an OLG (Overlapping Generations) model in which agents have heterogeneous preferences and investment horizons, with transaction costs, short term investors are more sensitive to changes in economic fundamentals and are less likely to own (and trade) in a declining market. The model predicts that the ownership composition contains information about current and future house prices and trading dynamics. Empirically, we find that home owners’ expected holding horizons co-vary negatively with house prices, and they also predict future (short term) returns. Copyright Springer Science+Business Media New York 2014

Suggested Citation

  • Robert Edelstein & Wenlan Qian, 2014. "Short-Term Buyers and Housing Market Dynamics," The Journal of Real Estate Finance and Economics, Springer, vol. 49(4), pages 654-689, November.
    • Handle: RePEc:kap:jrefec:v:49:y:2014:i:4:p:654-689
    DOI: 10.1007/s11146-012-9395-7
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