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Housing purchases and the dynamics of housing wealth

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  • Olympia Bover

    () (Banco de España)

Abstract

I model the purchase behavior of main and secondary housing by Spanish households using the panel sample from the first two waves of the Spanish household finance survey (EFF). I estimate discrete hazard models using retrospective and within-period purchase sequences. I also estimate an (S,s) model combining transactions data with longitudinal information on household wealth and housing stock values. I look at the role of adaptive expectations about the rate of return on housing and find they have a positive and signifi cant effect on the demand for houses. This is true for historical and within-period purchase probabilities as well as for the target ratio of housing wealth to total wealth. The volatility of house price growth has a negative effect on purchases for investment but a positive one on purchases for consumption.

Suggested Citation

  • Olympia Bover, 2010. "Housing purchases and the dynamics of housing wealth," Working Papers 1036, Banco de España;Working Papers Homepage.
  • Handle: RePEc:bde:wpaper:1036
    as

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    References listed on IDEAS

    as
    1. Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-436, June.
    2. De Long, J Bradford, et al, 1990. " Positive Feedback Investment Strategies and Destabilizing Rational Speculation," Journal of Finance, American Finance Association, vol. 45(2), pages 379-395, June.
    3. James Banks & Richard Blundell & Zoë Oldfield & James P. Smith, 2016. "House Price Volatility and the Housing Ladder," NBER Chapters,in: Insights in the Economics of Aging, pages 87-119 National Bureau of Economic Research, Inc.
    4. Guiso, Luigi & Jappelli, Tullio, 2002. "Private Transfers, Borrowing Constraints and the Timing of Homeownership," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 34(2), pages 315-339, May.
    5. Monika Piazzesi & Martin Schneider, 2009. "Momentum Traders in the Housing Market: Survey Evidence and a Search Model," American Economic Review, American Economic Association, vol. 99(2), pages 406-411, May.
    6. Patrick Bajari & Phoebe Chan & Dirk Krueger & Daniel Miller, 2013. "A Dynamic Model Of Housing Demand: Estimation And Policy Implications," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54(2), pages 409-442, May.
    7. Mark Andrew & Geoffrey Meen, 2003. "Housing Transactions and the Changing Decisions of Young Households in Britain: The Microeconomic Evidence," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 31(1), pages 117-138, March.
    8. Javier Andrés & Óscar Arce & Carlos Thomas, 2013. "Banking Competition, Collateral Constraints, and Optimal Monetary Policy," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(s2), pages 87-125, December.
    9. Min Hwang & John M. Quigley, 2006. "Economic Fundamentals In Local Housing Markets: Evidence From U.S. Metropolitan Regions," Journal of Regional Science, Wiley Blackwell, vol. 46(3), pages 425-453.
    10. James Banks & Richard Blundell & Zoë Oldfield & James P. Smith, 2016. "House Price Volatility and the Housing Ladder," NBER Chapters,in: Insights in the Economics of Aging, pages 87-119 National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Household finance; house purchases; secondary homes; housing returns; adaptive expectations; (S; s) rule;

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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