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Equilibrium Dynamics in a Matching Theoretic-Model of the Housing Market

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  • Lisi, Gaetano

Abstract

In light of the recent and growing literature which has extended the use of search and matching models even to the housing market, this paper introduces dynamic analysis to a simple stationary state equilibrium model. Contrary to what occurs in the labour market, the dynamic adjustment to equilibrium depends on the level of matching frictions present in the market. Precisely, if matching frictions are high, sellers bear in mind future expectations regarding total vacancies when deciding how many vacancies to post on the market; as a consequence, the market tensions respond quickly to any changes, immediately reaching the equilibrium value. Instead, with low matching frictions any dynamic adjustment path leads to equilibrium without the need for “forward looking” behaviour on behalf of sellers.

Suggested Citation

  • Lisi, Gaetano, 2013. "Equilibrium Dynamics in a Matching Theoretic-Model of the Housing Market," MPRA Paper 62317, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:62317
    as

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    File URL: https://mpra.ub.uni-muenchen.de/62317/1/MPRA_paper_62317.pdf
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    References listed on IDEAS

    as
    1. Charles Ka Yui Leung & Jun Zhang, 2011. ""Fire Sales" in Housing Market: Is the House- Search Process Similar to a Theme Park Visit?," International Real Estate Review, Global Social Science Institute, vol. 14(3), pages 311-329.
    2. Christopher A. Pissarides, 2000. "Equilibrium Unemployment Theory, 2nd Edition," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262161877, December.
    3. Wheaton, William C, 1990. "Vacancy, Search, and Prices in a Housing Market Matching Model," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1270-1292, December.
    4. Brian Petereson, 2009. "Fooled by Search: Housing Prices, Turnover and Bubbles," Caepr Working Papers 2009-004, Center for Applied Economics and Policy Research, Economics Department, Indiana University Bloomington.
    5. Robert Novy‐Marx, 2009. "Hot and Cold Markets," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 37(1), pages 1-22, March.
    6. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Housing Markets; Matching Theory; Equilibrium Dynamics;
    All these keywords.

    JEL classification:

    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • J64 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Unemployment: Models, Duration, Incidence, and Job Search
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • 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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