Discussion paper

DP10342 Buying First or Selling First in Housing Markets

Housing transactions by owner-occupiers take two steps, purchase of a new property and sale of the old housing unit. This paper shows how the transaction sequence decision of owner-occupiers depends on, and in turn, affects housing market conditions in an equilibrium search-and-matching model of the housing market. We show that home-owners prefer to buy first whenever there are more buyers than sellers in the market. This behavior leads to multiple steady state equilibria and to self-fulfilling fluctuations in prices and time-on-market. Equilibrium switches creates large fluctuations in the housing market, which are broadly consistent with stylized facts on the housing cycle.


Moen, E, P Nenov and F Sniekers (2015), ‘DP10342 Buying First or Selling First in Housing Markets‘, CEPR Discussion Paper No. 10342. CEPR Press, Paris & London. https://cepr.org/publications/dp10342