Discussion paper

DP8128 Housing purchases and the dynamics of housing wealth

I model the purchase behavior of main and secondary housing by Spanish households using the panel sample from the first two waves of the Spanish household finance survey (EFF). I estimate discrete hazard models using retrospective and within-period purchase sequences. I also estimate an (S,s) model combining transactions data with longitudinal information on household wealth and housing stock values. I look at the role of adaptive expectations about the rate of return on housing and find they have a positive and significant effect on the demand for houses. This is true for historical and within-period purchase probabilities as well as for the target ratio of housing wealth to total wealth. The volatility of house price growth has a negative effect on purchases for investment but a positive one on purchases for consumption.

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Citation

Bover, O (2010), “DP8128 Housing purchases and the dynamics of housing wealth”, CEPR Press Discussion Paper No. 8128. https://cepr.org/publications/dp8128