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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. Allen Head & Huw Lloyd‐Ellis & Derek Stacey, 2023. "Heterogeneity, Frictional Assignment, And Home‐Ownership," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(3), pages 1265-1308, August.
    2. L. Rachel Ngai & Kevin D. Sheedy, 2024. "The Ins And Outs Of Selling Houses: Understanding Housing‐Market Volatility," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(3), pages 1415-1440, August.
    3. 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.
    4. Antonia Díaz & Belén Jerez & Juan Pablo Rincón-Zapatero, 2024. "Housing Prices and Credit Constraints in Competitive Search," The Economic Journal, Royal Economic Society, vol. 134(657), pages 220-270.
    5. repec:cte:werepe:35536 is not listed on IDEAS
    6. Hans R.A. Koster & Jan Rouwendal, 2024. "Housing Market Discount Rates: Evidence From Bargaining And Bidding Wars," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(2), pages 955-1002, May.
    7. DeFusco, Anthony A. & Nathanson, Charles G. & Zwick, Eric, 2022. "Speculative dynamics of prices and volume," Journal of Financial Economics, Elsevier, vol. 146(1), pages 205-229.
    8. Anenberg, Elliot & Ringo, Daniel, 2024. "Volatility in Home Sales and Prices: Supply or Demand?," Journal of Urban Economics, Elsevier, vol. 139(C).
    9. Michele Loberto & Andrea Luciani & Marco Pangallo, 2022. "What Do Online Listings Tell Us about the Housing Market?," International Journal of Central Banking, International Journal of Central Banking, vol. 18(4), pages 1-52, October.
    10. Miroslav Gabrovski & Victor Ortego-Marti, 2025. "Home Construction Financing and Search Frictions in the Housing Market," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 55, January.
    11. Margaret Jacobson, 2019. "Beliefs, Aggregate Risk, and the U.S. Housing Boom," 2019 Meeting Papers 1549, Society for Economic Dynamics.
    12. Miroslav Gabrovski & Victor Ortego-Marti, 2024. "On the slope of the Beveridge curve in the housing market," Economics Bulletin, AccessEcon, vol. 44(3), pages 948-960.
    13. Charles Ka Yui LEUNG, 2022. "Housing and Macroeconomics," ISER Discussion Paper 1197, Institute of Social and Economic Research, Osaka University.
    14. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "On the Positive Slope of the Beveridge Curve in the Housing Market," Working Papers 202113, University of California at Riverside, Department of Economics.
    15. Gabrovski, Miroslav & Ortego-Marti, Victor, 2021. "Search and credit frictions in the housing market," European Economic Review, Elsevier, vol. 134(C).
    16. Rangan Gupta & Damien Moodley, 2023. "Housing Search Activity and Quantiles-Based Predictability of Housing Price Movements in the United States," Working Papers 202335, University of Pretoria, Department of Economics.
    17. Head, Allen & Sun, Hongfei & Zhou, Chenggang, 2023. "Indebted sellers, liquidity and mortgage standards," European Economic Review, Elsevier, vol. 151(C).

    More about this item

    Keywords

    Housing market; Search and Matching; Endogenous moving; Match quality investment;
    All these keywords.

    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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