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Buying First or Selling First in Housing Markets

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  • Moen, Espen R
  • Nenov, Plamen T.
  • Sniekers, Florian

Abstract

Housing transactions by owner-occupiers take two steps, purchase of a new property and sale of the old housing unit. This paper shows how the transaction sequence decision of owner-occupiers depends on, and in turn, affects housing market conditions in an equilibrium search-and-matching model of the housing market. We show that home-owners prefer to buy first whenever there are more buyers than sellers in the market. This behavior leads to multiple steady state equilibria and to self-fulfilling fluctuations in prices and time-on-market. Equilibrium switches creates large fluctuations in the housing market, which are broadly consistent with stylized facts on the housing cycle.

Suggested Citation

  • Moen, Espen R & Nenov, Plamen T. & Sniekers, Florian, 2015. "Buying First or Selling First in Housing Markets," CEPR Discussion Papers 10342, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:10342
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    Citations

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    Cited by:

    1. Elliot Anenberg & Daniel R. Ringo, 2019. "The Propagation of Demand Shocks Through Housing Markets," Finance and Economics Discussion Series 2019-084, Board of Governors of the Federal Reserve System (U.S.).
    2. Leung, Charles Ka Yui & Tse, Chung-Yi, 2017. "Flipping in the housing market," Journal of Economic Dynamics and Control, Elsevier, vol. 76(C), pages 232-263.
    3. Jan Eeckhout & Ilse Lindenlaub, 2019. "Unemployment Cycles," American Economic Journal: Macroeconomics, American Economic Association, vol. 11(4), pages 175-234, October.
    4. Espen R Moen & Plamen T Nenov & Florian Sniekers, 2021. "Buying First or Selling First in Housing Markets," Journal of the European Economic Association, European Economic Association, vol. 19(1), pages 38-81.
    5. Ilse Lindenlaub, 2015. "Unemployment Cycles," 2015 Meeting Papers 1368, Society for Economic Dynamics.
    6. Alina Arefeva, 2016. "How Auctions Amplify House-Price Fluctuations," 2016 Meeting Papers 714, Society for Economic Dynamics.
    7. Elliot Anenberg & Patrick Bayer, 2020. "Endogenous Sources Of Volatility In Housing Markets: The Joint Buyer–Seller Problem," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 61(3), pages 1195-1228, August.
    8. Liberati, Danilo & Loberto, Michele, 2019. "Taxation and housing markets with search frictions," Journal of Housing Economics, Elsevier, vol. 46(C).
    9. Randall Wright & Philipp Kircher & Benoit Julîen & Veronica Guerrieri, 2017. "Directed Search: A Guided Tour," NBER Working Papers 23884, National Bureau of Economic Research, Inc.
    10. Erlend Eide Bø, 2019. "Buy to let. Investment buyers in a housing search model," Discussion Papers 896, Statistics Norway, Research Department.
    11. Yu Zhu & Randall Wright & Damien Gaumont, 2017. "Modeling House Prices," 2017 Meeting Papers 744, Society for Economic Dynamics.

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    More about this item

    Keywords

    housing market; order of transactions; search frictions; strategic complementarities;
    All these keywords.

    JEL classification:

    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • 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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