DP10346 Moving House
|Author(s):||Liwa Rachel Ngai, Kevin D. Sheedy|
|Publication Date:||January 2015|
|Keyword(s):||endogenous moving, housing market, match quality investment, search and matching|
|JEL(s):||D83, E22, R21, R31|
|Programme Areas:||International Macroeconomics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=10346|
Using data on house sales and inventories of unsold houses, this paper shows that changes in sales volume are largely explained by changes in the frequency at which houses are put up for sale rather than changes in the length of time taken to sell them. Thus the decision to move house is key to understanding the volume of sales. This paper builds a model where homeowners chose when to move house, which can be seen as an investment in housing match quality. Since moving house is an investment with upfront costs and potentially long-lasting benefits, the model predicts that the aggregate moving rate depends on macroeconomic variables such as interest rates. The endogeneity of moving also means that those who move come from the bottom of the existing match quality distribution, which gives rise to a cleansing effect and leads to overshooting of housing-market variables.