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Search and Credit Frictions in the Housing Market

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  • Miroslav Gabrovski
  • Victor Ortego-Marti

    (Department of Economics, University of California Riverside)

Abstract

This paper develops a model of the housing market with search and credit frictions. The interaction between the two sources of friction gives rise to a novel channel through which the financial sector affects prices and liquidity in the housing market and leads to multiple equilibria. In a numerical exercise, we gauge the relative contribution of credit market shocks to the observed patterns in housing prices, time-to-sell, and mortgage debt-to-price ratio in the U.S. data prior to the $2007$ housing market crash. Our results suggest that shocks associated with the credit frictions channel had a relatively larger impact on the observed build-up in mortgage debt and lack of change in time-to-sell than on the increase in prices.

Suggested Citation

  • Miroslav Gabrovski & Victor Ortego-Marti, 2020. "Search and Credit Frictions in the Housing Market," Working Papers 202016, University of California at Riverside, Department of Economics.
    • Handle: RePEc:ucr:wpaper:202016
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    Cited by:

    1. N. Edward Coulson & Thao Le & Victor Ortego-Marti & Lily Shen, 2024. "Tenant Rights, Eviction, and Rent Affordability," Working Papers 202404, University of California at Riverside, Department of Economics.
    2. Gabrovski, Miroslav & Ortego-Marti, Victor, 2019. "The cyclical behavior of the Beveridge Curve in the housing market," Journal of Economic Theory, Elsevier, vol. 181(C), pages 361-381.
    3. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "On the Slope of the Beveridge Curve in the Housing Market," Working Papers 202105, University of Hawaii at Manoa, Department of Economics.
    4. Gabrovski, Miroslav & Ortego-Marti, Victor, 2021. "Search and credit frictions in the housing market," European Economic Review, Elsevier, vol. 134(C).
    5. 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.
    6. 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.
    7. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2024. "Search frictions in rental markets: Evidence from urban China," China Economic Review, Elsevier, vol. 83(C).
    8. Gabrovski, Miroslav & Kospentaris, Ioannis, 2021. "Intermediation in over-the-counter markets with price transparency," Journal of Economic Theory, Elsevier, vol. 198(C).
    9. Miroslav Gabrovski & Victor Ortego-Marti, 2021. "Efficiency in the Housing Market with Search Frictions," Working Papers 202108, University of California at Riverside, Department of Economics.
    10. 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.
    11. Giulio Cornelli & Jon Frost & Saurabh Mishra, 2023. "Artificial intelligence, services globalisation and income inequality," BIS Working Papers 1135, Bank for International Settlements.
    12. Fan, Ying & Fu, Yuqi & Yang, Zan & Chen, Ming, 2023. "Search Frictions in Rental Markets: Evidence from Urban China," Working Paper Series 23/11, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.

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    More about this item

    Keywords

    Housing market; Credit Frictions; Search and Matching; Multiple Equilibria; Mortgages;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • 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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