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- Title
Search, Liquidity, and the Dynamics of House Prices and Construction<sup>†</sup>.
- Abstract
The dynamics of house prices, sales, construction, and population growth in response to city-specific income shocks are characterized for 106 US cities. A dynamic model of search in the housing market in which construction, the entry of buyers, house prices, and sales are determined in equilibrium is then developed. The theory generates dynamics qualitatively consistent with the observations and a version calibrated to match key features of the US housing market offers a substantial quantitative improvement over models without search. In particular, variation in the time it takes to sell induces transaction prices to exhibit serially correlated growth. (JEL D83, R21, R23, R31)
- Subjects
UNITED States; HOUSING market; HOUSING forecasting; HOME prices; HOUSE construction; ECONOMIC shock; INCOME; LIQUIDITY (Economics); HOUSING
- Publication
American Economic Review, 2014, Vol 104, Issue 4, p1172
- ISSN
0002-8282
- Publication type
Article
- DOI
10.1257/aer.104.4.1172