DP17127 Winners and Losers of House Price Booms and Busts

Author(s): Hamish Low, Virginia Sánchez-Marcos
Publication Date: March 2022
Date Revised: May 2022
Keyword(s): house price fluctuations, Labor Supply, mortgage costs
JEL(s): D31, E32, J22
Programme Areas: Macroeconomics and Growth
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=17127

Fluctuations in house price generate substantial heterogeneity in the price of purchase of similar dwellings depending on the time of purchase. These differences in the price of purchase have large effects on life-time consumption and on income-net-of- housing-costs. We document these effects using the large house price fluctuations during the recent housing boom-bust in Spain. Households can mitigate these impacts through changing labor supply which we estimate using an IV strategy. Men work more in response to higher house prices, whereas the correlation of house prices and labor supply for women is driven by selection: households where women work more, buy more expensive houses.