Discussion paper

DP7953 Winners and Losers in Housing Markets

This paper is a quantitatively-oriented theoretical study into the interaction between housing prices, aggregate production, and household behavior over a lifetime. We develop a life-cycle model of a production economy in which land and capital are used to build residential and commercial real estates. We find that, in an economy where the share of land in the value of real estates is large, housing prices react more to an exogenous change in expected productivity or the world interest rate, causing a large redistribution between net buyers and net sellers of houses. Changing financing constraints, however, has limited effects on housing prices.


Kiyotaki, N, A Michaelides and K Nikolov (2010), ‘DP7953 Winners and Losers in Housing Markets‘, CEPR Discussion Paper No. 7953. CEPR Press, Paris & London. https://cepr.org/publications/dp7953