Citation

Discussion Paper Details

Please find the details for DP9946 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Buying First or Selling First in Housing Markets

Author(s): Espen R Moen and Plamen T. Nenov

Publication Date: April 2014

Keyword(s): Excess volatility, Housing market, Order of transactions, Search frictions and Self-fulfilling fluctuations

Programme Area(s): Financial Economics

Abstract: Housing transactions by existing homeowners take two steps, a purchase of a new property and sale of the old housing unit. These two decisions are not independent, and their sequence may depend on the state of the housing market. This paper shows how the sequence of buyer-seller decisions depends on, and in turn, affects housing market conditions in an equilibrium search-and-matching model of the housing market. Under a simple payoff condition, we show that the decisions to ``buy first'' or ``sell first'' among existing homeowners are strategic complements - homeowners prefer to ``buy first'' whenever there are more buyers than sellers in the market. This behavior leads to multiple steady state equilibria and to dynamic equilibria featuring low frequency self-fulfilling fluctuations in house prices and time on the market. The model is broadly consistent with stylized facts about the housing market.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9946

Bibliographic Reference

Moen, E and Nenov, P. 2014. 'Buying First or Selling First in Housing Markets'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9946