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Winners and Losers in Housing Markets

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  • NOBUHIRO KIYOTAKI
  • ALEXANDER MICHAELIDES
  • KALIN NIKOLOV

Abstract

This paper is a quantitatively-oriented theoretical study into the interaction between housing prices, aggregate production, and household behaviour 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 structures. We find that, in an economy where the share of land in the value of structures is large, housing prices react more to an exogenous change in expected productivity or the world interest rate, causing large redistribution effects between net buyers and net sellers of houses. Changing the financing constraint, however, has limited effects on housing prices.
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Suggested Citation

  • Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43, pages 255-296, March.
  • Handle: RePEc:mcb:jmoncb:v:43:y:2011:i::p:255-296
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    JEL classification:

    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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