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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 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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  • Nobuhiro Kiyotaki & Alexander Michaelides & Kalin Nikolov, 2011. "Winners and Losers in Housing Markets," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 43(2‐3), pages 255-296, March.
    • Handle: RePEc:wly:jmoncb:v:43:y:2011:i:2-3:p:255-296
    DOI: 10.1111/j.1538-4616.2011.00374.x
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    JEL classification:

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

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