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The Decision to Move House and Aggregate Housing-Market Dynamics

Author

Listed:
  • L. Rachel Ngai

    () (Centre for Economic Policy Research (CEP)
    Economics Department London School of Economics (LSE)
    Centre for Macroeconomics (CFM))

  • Kevin Sheedy

    () (Centre for Economic Policy Research (CEP)
    Economics Department London School of Economics (LSE)
    Centre for Macroeconomics (CFM))

Abstract

Using data on house sales and inventories, this paper shows that housing-market dynamics are driven mainly by listings and less so by transaction speed, thus the decision to move house is key to understanding the housing market. The paper builds a model where moving house is essentially an investment in match quality, implying that moving depends on macroeconomic developments and housing-market conditions. The endogeneity of moving means there is a cleansing effect - those at the bottom of the match quality distribution move first - which generates overshooting in aggregate variables. The model is applied to the 1995{2004 housing-market boom.

Suggested Citation

  • L. Rachel Ngai & Kevin Sheedy, 2016. "The Decision to Move House and Aggregate Housing-Market Dynamics," Discussion Papers 1621, Centre for Macroeconomics (CFM).
  • Handle: RePEc:cfm:wpaper:1621
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    File URL: http://www.centreformacroeconomics.ac.uk/Discussion-Papers/2016/CFMDP2016-21-Paper.pdf
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    Cited by:

    1. Bø, Erlend Eide, 2018. "Housing match quality and demand: What can we learn from comparing buyer characteristics?," Journal of Housing Economics, Elsevier, vol. 41(C), pages 184-199.
    2. Anthony A. DeFusco & Charles G. Nathanson & Eric Zwick, 2017. "Speculative Dynamics of Prices and Volume," NBER Working Papers 23449, National Bureau of Economic Research, Inc.

    More about this item

    Keywords

    Housing market; Search and Matching; Endogenous moving; Match quality investment;

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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