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Discussion Paper Details

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Title: Housing purchases and the dynamics of housing wealth

Author(s): Olympia Bover

Publication Date: December 2010

Keyword(s): (S,s) rule, adaptive expectations, house purchases, Household finance, housing returns and secondary homes

Programme Area(s): Financial Economics

Abstract: I model the purchase behavior of main and secondary housing by Spanish households using the panel sample from the first two waves of the Spanish household finance survey (EFF). I estimate discrete hazard models using retrospective and within-period purchase sequences. I also estimate an (S,s) model combining transactions data with longitudinal information on household wealth and housing stock values. I look at the role of adaptive expectations about the rate of return on housing and find they have a positive and significant effect on the demand for houses. This is true for historical and within-period purchase probabilities as well as for the target ratio of housing wealth to total wealth. The volatility of house price growth has a negative effect on purchases for investment but a positive one on purchases for consumption.

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Bibliographic Reference

Bover, O. 2010. 'Housing purchases and the dynamics of housing wealth'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=8128