Housing Purchases and the Dynamics of Housing Wealth
Bank of Spain - Research Department; Centre for Economic Policy Research (CEPR)
December 16, 2010
Banco de Espana Working Paper No. 1036
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.
Number of Pages in PDF File: 43
Keywords: Household finance, house purchases, secondary homes, housing returns, adaptive expectations, (S,s) rule
JEL Classification: D14, G11
Date posted: December 18, 2010
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