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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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    1. Albrecht, James & Gautier, Pieter & Vroman, Susan, 2012. "A note on Peters and Severinov, “Competition among sellers who offer auctions instead of prices”," Journal of Economic Theory, Elsevier, vol. 147(1), pages 389-392.
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    3. Elliot Anenberg & Patrick Bayer, 2013. "Endogenous Sources of Volatility in Housing Markets: The Joint Buyer-Seller Problem," NBER Working Papers 18980, National Bureau of Economic Research, Inc.
    4. Diamond, Peter A, 1982. "Aggregate Demand Management in Search Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 90(5), pages 881-894, October.
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    6. Rosenthal, Leslie, 1997. "Chain-Formation in the Owner-Occupied Housing Market," Economic Journal, Royal Economic Society, vol. 107(441), pages 475-488, March.
    7. Antonia Díaz & Belén Jerez, 2013. "House Prices, Sales, And Time On The Market: A Search‐Theoretic Framework," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 54, pages 837-872, August.
    8. Maury, Tristan-Pierre & Tripier, Fabien, 2014. "Search strategies on the housing market and their implications on price dispersion," Journal of Housing Economics, Elsevier, vol. 26(C), pages 55-80.
    9. James Albrecht & Axel Anderson & Eric Smith & Susan Vroman, 2007. "Opportunistic Matching In The Housing Market," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 48(2), pages 641-664, May.
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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. Alina Arefeva, 2016. "How Auctions Amplify House-Price Fluctuations," 2016 Meeting Papers 714, Society for Economic Dynamics.
    5. 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.
    6. Liberati, Danilo & Loberto, Michele, 2019. "Taxation and housing markets with search frictions," Journal of Housing Economics, Elsevier, vol. 46(C).
    7. Randall Wright & Philipp Kircher & Benoit Julîen & Veronica Guerrieri, 2017. "Directed Search: A Guided Tour," NBER Working Papers 23884, National Bureau of Economic Research, Inc.
    8. Erlend Eide Bø, 2019. "Buy to let. Investment buyers in a housing search model," Discussion Papers 896, Statistics Norway, Research Department.
    9. 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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