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Housing Prices and Credit Constraints in Competitive Search

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  • Antonia Díaz
  • Belén Jerez
  • Juan Pablo Rincón-Zapatero

Abstract

Wealthier, risk-averse buyers pay more to speed up transactions in competitive search markets. This result is established in a dynamic housing model where households save to smooth consumption and build a down payment. ‘Block recursivity’ is ensured by the existence of risk-neutral housing intermediaries. In the long run, the calibrated benchmark features higher indebtedness and house prices than a Walrasian model, especially when housing supply elasticity is low. The long-run price effects of greater credit availability are much larger if rental and owner-occupied stocks are segmented, but even without segmentation they can be substantial when supply elasticity is low.

Suggested Citation

  • Antonia Díaz & Belén Jerez & Juan Pablo Rincón-Zapatero, 2024. "Housing Prices and Credit Constraints in Competitive Search," The Economic Journal, Royal Economic Society, vol. 134(657), pages 220-270.
    • Handle: RePEc:oup:econjl:v:134:y:2024:i:657:p:220-270.
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    File URL: http://hdl.handle.net/10.1093/ej/uead054
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